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INDUSTRIAL  GOVERNMENT 


THE  MACMILLAN  COMPANY 

NBW  YORK  •    BOSTON   •    CHICAGO 
DALLAS  •    ATLANTA   •    SAN  FRANCISCO 

MACMILLAN  &  CO.,  Limited 

LONDON   •    BOMBAY   •    CALCUTTA 
MELBOURNB 

THE  MACMILLAN  CO.  OF  CANADA,  Lid. 

TORONTO 


INDUSTRIAL 
GOVERNMENT 


BY 

JOHN  R.  COMMONS 

WILLIS     WISLER,    ALFRED   P.    HAAKE,    0.    F.    CARPENTER,    JENNIE 

MCMULUN    TURNER,    ETHEL    B.    DIETRICH,    JEAN    DAVIS, 

MALCOLM      SHARP,      JOHN      A.      COMMONS, 

UNIVERSITY     OF   WISCONSIN 


44591 


THE  MACMILLAN  COMPANY 
1921 

AU  rights  reserud 


PRINTED  IN  THE  UNITED  STATES  OF  AMERICA 


Copyright,  1921, 

By  the  MACMILLAN   COMPANY 

Set  up  and   electrotyped.     Published   May,    1921 


FERRIS 

PRINTING    COMPANY 

NEW  YORK    CITY 


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PREFACE 


fo  We  visited  some  thirty  establishments  from  July  to 
1^  September,  1919,  and  Wisconsin  to  Maine.  We  pre- 
V  pared  by  studying  industrial  government  in  books, 
papers  and  pamphlets  from  Russia  to  Australia.  We 
selected  as  large  variety  of  types  that  had  successful 
ic)  experience  as  we  could  find.  America  has  examples 
^  of  every  kind,  from  industrial  autocracy  to  the  farthest 
^  left  wing  of  revolutionary  democracy. 

We  specialized  somewhat  and  had  different  points 
of  view,  which  accounts  for  differences  noticeable  in 
the  "Inferences."     One  of  us  took  constitutional  gov- 
ernment    in    industry ;    another    took    the    employer's 
j  scheme   of   management;    another   the   wage-earner's 
J  scheme  of  democracy;  another  the  procedure  in  set- 
f^  tling  grievances;  another  shop  representation  of  em- 
"^  ployees.     We  spent  from  one  to  five  days  together  in 
each  establishment,  with  the  managers  and  with  the 
employees.     Individuals  followed  up  with  separate  in- 
quiries, in  one  case  spending  two  months  at  one  place. 
The  four  Wisconsin  manufacturers,  Messrs.  F.  J.  Sen- 
senbrenner,   M.  O.   Wertheimer,  D.   E.  Everest,  and 
Judson  Rosebush,  who  financed  the  bulk  of  our  travel- 
ing  expenses,    and    Maj.    E.    A.    Fitzpatrick,   of   the 
State   Board   of    Education,   who   aided  us   greatly, 
wished   to   know  the   best   practice   in   dealings   with 
labor  that  the  country  affords.     We  avoided  fresh  ex- 
periments and  selected  those  that  had  a  record  going 


vi  PREFACE 

back  before  the  war.  When  we  came  back  to  Madison 
each  one  of  our  party  was  made  responsible  for  cer- 
tain chapters,  but  the  others  contributed,  and  the  whole 
is  as  nearly  a  cooperative  product  as  any  collaboration 
can  be.  Certain  of  the  chapters  were  used  by  The 
Independent,  one  by  the  U.  S.  Bureau  of  Labor  Statis- 
tics in  its  Monthly  Labor  Review,  another  by  Indus- 
trial Management,  and  are  here  reprinted  with  per- 
mission. 

We  saw  that  each  establishment  visited  was  experi- 
mental. Each  was  looking  for  experiments  elsewhere. 
Nothing  is  settled  in  the  field  of  labor,  but  everything 
is  being  settled  every  day.  We  naturally  distinguished 
personality  from  system.  But  we  found  that  even 
that  distinction  was  treacherous.  Gradually  certain 
establishments  began  to  stand  out  as  distinctive.  Each 
had  something  that  was  unique.  Sometime^  its  dis- 
tinction sprang  from  its  system  of  organization;  some- 
times from  a  dominating  personality  that  seemed  to 
override  system.  Yet  even  that  personality  had  a 
system. 

We  tried  to  find  something  on  which  to  hang  the 
facts  in  each  business  concern.  One  of  the  concerns 
stood  out  as  a  struggle  for  power  of  organized  cap- 
ital and  organized  labor,  resulting  in  an  equilibrium 
which  we  named  due  process  of  law;  another  was  just 
plain  health  and  happiness  for  its  workers;  another 
was  faith  in  people  of  all  sorts  and  conditions;  several 
were  faith  in  the  management;  another  was  getting 
employees  to  think  about  the  future  of  the  business; 
another  was  cooperative  speeding-up;  another  was 
minute  measurement  of  human  motives  in  terms  of 
money ;  another  was  emancipation  from  absentee  own- 


PREFACE 


Vll 


ers,  and  government  by  the  Imaginative  minds  active 
in  the  business.  The  only  cash  profit-sharing  system 
that  we  found,  which  looked  good  to  us  at  the  time, 
broke  down  sixteen  months  later,  when  prices  dropped. 

All  of  them,  of  course,  had  features  in  common,  but 
these  ruling  ideas  stood  out  rather  clearly  as  we  neared 
the  end  of  our  journey  when  we  could  look  back  and 
compare  them  one  with  another. 

All  of  them  were  very  alive  and  were  making  great 
changes  in  short  periods,  both  in  system  and  person- 
ality. One  was  passing  from  autocracy  into  govern- 
ment by  employees;  another  from  scientific  manage- 
ment into  unionism;  another  from  welfare  into  self- 
government  ;  another  from  political  to  industrial  form 
of  government. 

One  interesting  fact  was  found :  the  sudden  or  grad- 
ual moral  conversion  of  an  employer  from  business 
to  humanity.  Employees  noted  it,  and  could  not  at 
first  believe  it,  or  were  still  incredulous,  and  told  us 
about  it,  and  so  did  the  employer  himself.  In  some 
cases  it  was  unionism  or  strikes  that  did  it.  In  others 
it  was  business  foresight  of  the  labor  problem.  In 
others  it  was  sermons  by  an  industrial  evangelist. 

We  noted  also  certain  obvious  contrasts.  In  one 
case,  not  however  included  in  this  book,  output  had 
fallen  off  two-thirds,  wages  had  doubled  and  high 
prices  took  care  of  both.  In  others  efficiency  had  in- 
creased nearly  as  much  as  wages,  so  that  the  increased 
cost  of  living  was  nearly  paid  for  by  increased  out- 
put per  man.  In  some  cases  wages  had  not  kept  up 
with  the  cost  of  living;  in  others  they  had  exceeded  the 
increased  cost.  In  some  cases  labor-turnover  was 
down  at  astonishingly  low  figures  compared  with  the 


viii  PREFACE 

industrial  world  in  general.  In  some  cases  seasonal 
industries  had  been  stabilized  so  that  no  employee  is 
laid  off.  In  others  a  reserve  army  is  depended  on  for 
elasticity.  In  others  the  rapid  growth  of  the  business 
has  overcome  instability  of  employment. 

We  give  here  only  eighteen  of  these  experiments  in 
Industrial  Government,  out  of  the  thirty  visited.  We 
do  not  say  "Industrial  Democracy."  We  find  widely 
different  things  done  in  the  name  of  Democracy.  The 
main  thing  is  that  they  are  being  done  by  very  vigorous 
men  and  women,  who  are  going  after  things,  and  are 
making  things  buzz.  Every  one  of  them  is  a  live  idea 
getting  itself  into  action.  Forms  of  government  are 
adapting  themselves  to  ideas  and  conditions. 

Yet  we  were  not  under  illusions.  We  looked  up  ex- 
perts in  industrial  government.  It  is  astonishing  what 
easy  marks  for  experts  many  employers  had  become  in 
the  summer  of  19 19.  From  all  sides  and  several  vo- 
cations these  experts  were  coming  in  and  setting  them- 
selves up.  They  got  long-distance  calls  from  employ- 
ers to  hurry  up  and  come  at  once.  They  lifted  the 
employers'  pocket-book  at  will.  One  would  think  that 
the  capitalistic  system  was  crumbling,  in  that  employ- 
ers had  lost  the  power  of  discipline.  In  some  cases  we 
found  that  they  had  actually  abdicated  and  turned  the 
labor  end  of  their  business  over  to  professors.  Just 
what  it  all  portended  was  a  puzzle.  Certainly  the  tem- 
fKjrary  scarcity  of  labor  was  a  leading  fact,  and  em- 
ployers began  to  regain  their  independence,  to  reduce 
wages  and  lay  off  the  professors  in  1920. 

Naturally  we  began  to  put  together  our  conclusions 
and  to  draw  up  some  general  statements,  based,  not 
only  on  these  eighteen  establishments,  but  also  on  oth- 


PREFACE  Ix 

ers.  We  are  not  ready,  however,  to  call  them  Con- 
clusions. Things  are  too  uncertain  in  labor  matters. 
We  content  ourselves  with  calling  them  "Inferences." 
Our  first  eighteen  chapters,  then,  describe  the  selected 
establishments.  Our  last  five  chapters  are  our  "In- 
ferences." 

January,  1921. 


CONTENTS 


PAGE 

Preface.    John  R.  Commons v 

PART  I.    ESTABLISHMENTS 

CHAPTER 

I.    Thinking    and    Planning.    Jennie    McMullin 

Turner  i 

II.    Faith  in  People.    John  A.  Commons     ...      13 

III,  From  Scientific  Management  to  Personal  Re- 

lations.   Alfred  P.  Haake 26 

IV.  Measurement  of  Motives.    Alfred  P.  Haake    .      35 

V.    Health     and     Happiness.    Jennie     McMullin 

Turner 47 

VI.    Government  by  Imagination.    Alfred  P.  Haake      58 

VII.  Cooperative   Speeding-Up.    O.  F.  Carpenter      .      70 

VIII.  "Industrial  Democracy."    O.  F.  Carpenter       .      ^7 

IX.    From     Political    to    Industrial     Government. 

O.   F.    Carpenter 87 

X.    Shop  Committee  that  Failed.    O.  F.  Carpenter    iio 

XI.    Towards    Government    by    Employees.      O.    F. 

Carpenter 125 

XII.    Profit-Sharing  that  Failed.    Jennie  McMullin 

Turner I35 

XIII.  From  Welfare  to  Democracy.    O.  F.  Carpenter    147 

XIV.  From    Scientific    Management    to    Unionism. 

Jennie  McMullin  Turner 158 

XV.    Standardization  and  Stabilization.    Ethel  B. 

Dietrich         168 


xii  CONTENTS 

CHAPTER  PAGE 

XVI.    Due  Process  of  Law.    Malcolm  P.  Sharp       .  193 

XVII.    Local    Representative    Government.     Jean    S. 

Davis 235 

XVIII.    The  Union  in  Control.    O.  F.  Carpenter    .      .  251 


PART  11.    INFERENCES 

XIX.    The    Opportunity    of    Management.    John    R. 

Commons 263 

XX.    Principles  of  Management.    Alfred  P.  Haake    273 

XXI.    Practice  of  Labor  Management.    Willis  Wisler    313 

XXII.    Instituting    Employee    Representation.    O.    F. 

Carpenter 340 

XXIII.    Joint  Control.    Jennie  McMullin  Turner        .    365 


PARTI.    ESTABLISHMENTS 


THINKING  AND  PLANNING 

The  manager  was  attending  a  committee  meeting. 
He  would  be  back  in  his  office  in  about  an  hour. 

The  offices  might  all  be  schoolrooms.  Plain  tables, 
many  chairs,  walls  hung  with  charts  and  diagrams — 
that  is  the  academic  and  utilitarian  background  for 
the  transaction  of  business  at  The  White  Motor  Com- 
pany of  Cleveland,  Ohio, 

The  time  of  waiting  passed  quickly.  We  were  mak- 
ing a  rather  furtive  inspection  of  the  charts  and 
blueprints  on  the  walls  when  a  dark,  energetic-looking 
man  came  forward  and  offered  to  explain  any  of  them 
which  we  did  not  understand.  We  expressed  sur- 
prise at  the  unusual  spectacle  of  a  company  posting 
for  public  consumption  the  facts  which  are  usually 
held  as  inviolate  secrets.  It  was  almost  embarrassing 
to  have  thus  boldly  thrust  upon  us  information  the 
like  of  which  we  had  sought  always  modestly,  often 
vainly,  and  had  usually  received  only  in  the  strictest 
confidence.  We  might  even  have  been  rival  manu- 
facturers, for  all  the  company  knew  of  us,  diligently 
inquiring  into  their  trade  secrets. 

We   also  expressed  our  interest  in  the  prominent 

I 


2  INDUSTRIAL  GOVERNMENT 

place  given  in  the  diagrams  to  the  Department  of 
Industrial  Relations, 

The  dark  young  man  thereupon  introduced  himself 
as  the  Director  of  Industrial  Relations,  We  recog- 
nized him  at  once  as  a  departure  from  the  ordinary 
run  of  things — a  new  type  of  Industrial  Director,  We 
had  heard  of  him  before  from  labor  officials  in  the 
city;  he  w;as  formerly  President  of  the  Cleveland 
Federation  of  Labor.  And  apparently  he  is  still 
greatly  respected  by  his  former  co-workers  in  the  labor 
movement. 

We  were  deep  in  his  theories  of  the  part  the  worker 
should  play  in  management  and  in  responsibility  for 
producing,  when  the  General  Manager  came  in  ab- 
ruptly. He  was  quite  taken,  he  told  us,  with  an  idea 
that  had  just  occurred  to  him  and  which  he  wished 
he  had  thought  of  in  time  to  take  up  with  his  men. 
Unfortunately  the  committee  had  disbanded  and  the 
men  had  gone  back  to  the  shops.  So  there  was  nothing 
for  him  to  do  but  wait  until  it  should  meet  again  two 
weeks  later.  He  turned  to  us  with  the  same  eagerness 
to  give  and  to  take  which  he  must  have  had  in  the 
meeting  just  dismissed.  The  committee,  as  he  ex- 
plained to  us,  is  composed  of  from  twenty  to  fifty 
employees,  each  one  of  whom  has  been  elected  by  a 
group  of  ten  fellow  employees  to  be  part  of  a  giant 
shop  committee,  to  attend  meetings  for  one  year,  and 
to  report  back  to  his  constituents  as  much  information 
as  he  is  able  to  absorb  and  impart. 

The  "shop  committee"  as  it  appears  here  is  a  unique 
institution.  It  is  not  a  union  committee;  it  is  not  a 
workmen's  council;  it  is  not  a  "company  union."  It 
lays  no  claim  to  being  a  form  of  "industrial  democ- 


THINKING  AND  PLANNING  3 

racy,"  and  it  has  nothing  to  do  with  collective  bargain- 
ing. It  is  simply  one  of  the  essential  parts — perhaps 
the  most  important  part — of  the  great  big  scheme  of 
thinking  and  planning  for  the  future  which  makes  the 
White  Motor  worth  thinking  about  and  writing  about. 
The  "shop  committee"  is  just  a  mammoth  forum,  di- 
vided up  into  sections  which  meet  every  alternate  week 
to  talk  over  with  the  manager  or  his  assistants  any 
part  of  the  whole  industrial  problem  from  the  situation 
in  Russia  and  Australia  to  the  answer  to  the  question, 
"Where  will  the  White  Motor  be  when  the  conditions 
change  ?" 

Some  kind  of  readjustment,  declare  the  management, 
is  bound  to  come.  It  does  not  make  much  difference 
what  kind  of  a  change  is  coming  if  we  are  only  ready 
for  it.  White  Motor  wants  to  be  ready.  Anybody, 
be  he  capitalist,  socialist,  radical,  or  trade  union  agi- 
tator, is  welcome  to  come  in  and  tell  the  management 
what  kind  of  a  change  he  thinks  is  coming.  The  man- 
ager invites  information  and  goes  after  it.  He  searches 
the  papers,  radical  and  reactionary,  foreign  and  Ameri- 
can. He  gets  every  slant  possible  on  human  thought 
and  action.  And  he  seems  to  have  here  in  his  plant 
a  germ  of  almost  every  great  movement  which  is 
shaking  the  world  to-day.  Whichever  one  of  these 
ideas  wins  out,  the  White  Motor  has  a  chance  of  pass- 
ing over  gradually  into  the  new  regime  without  any 
violent  upheaval. 

We  asked  this  unusual  manager  to  consider  us  one 
of  his  committee  and  give  us  exactly  the  kind  of  thing 
he  had  been  handing  out  to  his  men  the  hour  before, 
or  previous  hours.  He  agreed,  and  this  is  what  he 
gave  us: 


4  INDUSTRIAL  GOVERNMENT 

"We  do  not  know  which  way  the  country  is  going. 
A  financial  readjustment  is  certain  to  come.  But 
whatever  the  result  White  Motor  wants  to  survive, 
and  wants  to  govern  itself  and  not  be  dictated  to  by 
outsiders.  How  can  we  survive  and  keep  control  of 
this  business  among  ourselves  whichever  way  the 
country  goes?  And  what  is  there  in  it  for  you  to 
have  the  White  Motor  keep  on  in  the  way  it  has  started, 
regardless  of  what  happens  outside? 

''Let  us  see.  There  are  three  hundred  manufac- 
turers of  motor  trucks  in  America.  A  large  number 
of  them  will  go  to  the  wall.  We  manufacture  about 
ten  per  cent  of  the  total  output  of  the  country.  We 
want  to  keep  that  ten  per  cent.  If  we  do  we  shall  have 
to  keep  on  absorbing  our  ten  per  cent  of  all  those  that 
go  under.  That  means  that  we  shall  need  to  double  our 
plant  in,  say  two  years,  and  triple  it  in  five  years. 
Now,  if  we  double  or  triple  our  plant  what  will  it 
mean  for  us? 

"Well,  we  doubled  it  during  the  past  five  years  and 
here  is  what  it  meant : 

"While  our  plant  value  increased  from  $1,879,000 
in  19 1 4  to  $3,650,000  in  19 19  our  production  value 
increased  from  $9,000,000  in  19 14  to  over  $35,000,000 
in  1 9 19.  This  means  that  five  years  ago  for  every 
dollar  we  invested  on  our  plant  we  produced  about 
$4.80  worth  of  motor  trucks,  and  this  year  for  every 
dollar  in  the  plant  we  produced  $9.60  worth  of  trucks. 

"The  number  of  employees  has  more  than  doubled. 
The  average  number  of  men  in  1914  was  2202;  now 
it  is  5475.  The  production  per  man  in  1914  was 
1-92/100  trucks;  in  1919,  it  was  2-75/100  trucks, 
an  increase  of  43  per  cent. 


THINKING  AND  PLANNING  5 

"We  have  increased  the  earnings  of  our  employees 
from  an  average  of  $15.03  a  week  in  1914  to  $31.64 
in  1919,  or  an  increase  of  iii  per  cent.  Our  total 
pay  roll  for  factory  employees  in  19 14  was  $1,688,000, 
now  it  is  $8,835,000. 

"All  this  has  been  done  without  any  material  in- 
crease in  the  price  to  the  purchaser  of  our  trucks. 
Our  price  has  been  increased  only  10  per  cent,  at  a 
time  when  all  prices,  wages,  and  cost  of  material  have 
gone  up  50  per  cent,  100  per  cent,  or  more. 

"Looks  wonderful,  doesn't  it?  Can  we  keep  it  up? 
See  where  we  must  be  to  double  in  two  years  and  triple 
in  five  years,  if  we  can  keep  it  up.  The  figures  given 
below  show  the  estimated  factory  value  of  production 
for  each  of  the  next  five  years : 

FACTORY  VALUE  OF  PRODUCTION 

1920 $51,961,350 

1921  67,244,100 

1922  .  .  . .  .   82,526,850 

1923 97,809,600 

1924 •  .  113,092,350 

"The  big  thing  is,  where  are  we  going  to  get  the 
capital  in  order  to  expand?  The  business  that  does 
not  expand  is  really  falling  behind.  We  must  expand 
further  than  our  competitors,  or  else  we  are  falling 
behind.  If  we  take  five  years  we  can  probably  build 
up  our  plant  out  of  earnings.  If  we  have  to  go  too  fast 
in  order  to  take  up  our  share  of  the  business  of  those 
who  fail  we  may  have  to  go  and  get  outside  capital. 
As  long  as  we  have  the  present  control  you  can  be 
certain  that  the  present  labor  policy  will  be  carried  out. 


6  INDUSTRIAL  GOVERNMENT 

Our  policy  has  been  in  the  past  and  is  now,  to  limit 
payment  of  dividends  to  8  per  cent  on  capital  stock." 

On  what  devices  does  the  White  Motor  depend  for 
keeping  up  and  increasing  production? 

The  White  Motor  has  neither  any  system  of 
bonuses,  premiums  or  piece  rates.  Everything  is  a 
straight  day  wage.  No  time  and  motion  studies,  no 
specific  inducements  to  individuals  to  increase  their 
output. 

There  is,  of  course,  a  very  careful  system  of 
scheduling  the  work  through  the  factory  and  there  is 
a  standard  output  figured  out  for  a  year  ahead  show- 
ing how  many  trucks  must  be  made  if  they  keep  up 
to  the  plan  of  expansion.  The  year's  output  has  been 
narrowed  down  to  four  types  of  motor  trucks,  with 
some  variations  within  the  types,  and  all  models  are 
scheduled  for  erection  daily.  The  figure  of  each  day's 
output  of  completed  trucks  is  filed  with  the  various 
superintendents  so  that  the  organization  is  familiar 
with  the  result  of  each  day's  work  and  the  production 
both  of  completed  trucks  and  the  main  assemblies, 
such  as  engines,  axles,  and  transmissions,  is  published 
each  month  in  the  regular  issue  of  the  White-Book 
so  that  the  workmen  are  kept  informed  concerning 
the  product  of  the  factory.  No  individual  is  speeded 
up  by  a  piece  rate,  bonus  or  premium — the  whole 
factory  is  simply  watching  that  the  schedule  is  met  or 
exceeded.  Then,  if  a  department  falls  behind,  or  if 
the  whole  factory  falls  behind,  the  fifty-eight  hundred 
employees  want  to  know  where  the  fault  lies.  The 
committees  and  the  management  begin  to  inquire. 
Cases  come  along  occasionally  where  the  men  in  a  de- 
partment  freeze   out  a  loafer.     The   management  is 


THINKING  AND  PLANNING  7 

proud  of  the  fact  that  they  seldom  fire  a  man,  and, 
most  of  all,  that  the  men  seldom  quit. 

The  turnover  records  are  astonishing.  During  the 
year  1919  the  rate  was  about  24^  per  cent.  It  got 
as  low  as  1.23  per  cent  in  February;  as  high  as  2.65 
per  cent  in  May.  In  19 16  the  turnover  was  the  high- 
est— J  J  per  cent  for  the  year;  in  19 17  it  was  66  per 
cent;  in  19 18,  it  was  63  per  cent,  but  this  should  come 
down  to  54  per  cent  after  deducting  army  enlistments. 
The  average  for  other  factories  that  year  in  Cleve- 
land and  vicinity  was  stated  by  the  company  to  have 
been  about  300  per  cent. 

To  sum  it  all  up,  what  are  the  White  Motor's  sub- 
stitutes for  the  motion  studies,  piece  work,  profit  shar- 
ing and  all  the  other  scientific  methods  of  appealing 
to  the  individual  for  increased  product. 

Isn't  it  something  like  this  ?  Thinking  and  planning 
for  the  future.  Keeping  the  mind  of  every  man  away 
from  whatever  there  is  of  dullness  and  monotony  in 
his  task.  Just  touching  the  imagination;  arousing  in 
every  heart  zeal  for  progress  and  pride  in  a  great 
common  enterprise;  lighting  up  the  most  menial  and 
stupefying  task  with  the  rays  of  a  great  industrial 
vision. 

But  all  this  is  not  as  easy  as  it  may  sound.  How 
are  you  going  to  get  a  good  red-blooded  workman  to 
sit  down  and  be  lectured  to  on  the  subject  of  a  great 
industrial  vision?  How  are  you  going  to  get  him  to 
believe  that  expansion  has  something  in  it  for  him? 

The  White  Motor  Management  does  it  by  the  policy 
of  honesty  and  openness.  It  furnishes  copies  of  its 
annual  report  to  all  employees  requesting  it,  and  sets 
forth  in  the  White-Book  the  essential  facts  contained 


8  INDUSTRIAL  GOVERNMENT 

in  the  report.  The  White-Book  is  sent  every  month 
into  the  homes  of  every  employee  and  it  forces  in- 
formation about  itself  not  only  on  the  men  but  also  on 
their  vv^ives  and  families.  It  shows  what  they  have  to 
fear  and  what  they  have  to  hope,  and  then  promises  to 
keep  faith  with  them  in  sharing  prosperity  with  them. 
It  does  not  offer  all  this  information  in  the  name 
of  industrial  democracy.  The  shop  committee  in  the 
White  Motor  Company  was  started  neither  as  a  griev- 
ance committee  nor  a  legislative  body.  The  idea  back 
of  it  was  not  in  any  sense  the  idea  back  of  the  inside 
organization  of  workmen  which  union  men  are  ac- 
customed to  designate  with  greater  or  less  scorn  as 
"a  company  union."  The  company  has  never  made 
any  attempt  to  give  the  employees  any  degree  of  in- 
dustrial self-government.  One  of  the  objects  of  this 
committee  was  apparently  exactly  the  opposite — it  was 
that  some  day  employees  may  assume  a  greater  or  less 
degree  of  self-government,  and  if  this  company  is 
going  to  be  one  of  those  which  survive  it  must  pre- 
pare the  workmen  to  exercise  intelligently  whatever 
degree  of  power  they  may  have.  It  is  not  for  the 
company  to  give  power,  it  is  for  it  to  give  the  in- 
formation which  may  save  it  when  the  workmen  have 
power.  The  company  is  not  trying  to  determine  the 
form  of  organization  under  which  the  power  may 
sometime  be  wielded.  The  company  keeps  in  its  em- 
ploy strong,  responsible,  intelligent  leaders  of  every 
variety  of  organization  which  is  likely  ever  to  be  in 
control.  This  seems  to  be  all  that  it  cares  to  do  to- 
ward securing  a  safe  transition  into  any  form  of  in- 
dustrial government  which  may  come.  Which  form 
this  industrial  government  will  take  is  still  a  question. 


THINKING  AND  PLANNING  9 

Many  trades  are  to  be  found  in  the  factory,  most 
of  them  at  least  partially  organized.  Cleveland  is  one 
of  the  most  highly  organized  cities  in  the  country,  so 
that  although  White  Motor  has  an  open  shop  policy, 
a  large  part  of  the  men  probably  are  or  have  been 
at  some  time  members  of  the  union  of  their  trade. 
No  union,  however,  has  ever  presented  a  demand  to 
the  company.  Informal  shop  committees  have  asked 
for  wage  increases  or  other  changes  in  conditions,  and 
their  requests  have  been  listened  to,  but  the  unions 
have  not  interfered  in  the  question  of  wages.  Only 
once  have  they  shown  any  great  degree  of  activity 
and  that  was  when  the  men  got  an  idea  that  a  change 
of  management  was  impending.  Then  how  can  the 
White  Motor  Company  get  production  like  this  on  a 
straight  hourly  rate? 

In  the  long  run,  according  to  the  officials  of  the 
company,  time  rather  than  piece  rates  will  prove  to  be 
the  cheapest.  It  costs  too  much  to  hurry.  It  is  more 
economical  to  employ  a  young  man  and  keep  him  until 
he  grows  old,  than  to  wear  out  a  man,  or  lose  him 
when  he  is  still  young.  They  point  to  their  average 
age  of  over  thirty-five  and  their  annual  turnover  of 
245^  per  cent  in  connection  with  their  increased  per 
capita  production  figures.  Time  and  motion  studies, 
they  maintain,  are  almost  necessarily  liable  to  grave 
error.  They  are  not  elastic  enough.  In  order  to  be 
fairly  accurate  they  need  to  be  taken  on  very  hot  days 
and  comfortable  days;  early  in  the  morning  and  just 
before  closing  time;  early  in  the  week  and  late  in  the 
week;  during  periods  of  political  and  industrial  tur- 
moil, and  during  periods  of  political  and  industrial 
calm.     They  vary  under  conditions  of  domestic  dif- 


lo  INDUSTRIAL  GOVERNMENT 

ficulty  and  domestic  tranquillity.  Human  being's  are 
not  constant  in  their  ability  to  perform.  Their  at- 
tainments must  be  measured  over  reasonably  long  pe- 
riods. 

Is  there  any  other  factor  that  can  help  to  account 
for  increasing  per  capita  production  on  an  hourly  rate? 

When  you  offer  desirable  conditions  you  get  your 
pick  of  employees. 

As  might  be  expected  there  is  never  any  lack  of  ap- 
plicants for  work  at  the  White  Motor.  As  a  matter 
of  fact,  the  employment  department  takes  about  one 
out  of  every  thirty  or  forty  applicants.  Two  condi- 
tions are  required  of  each  one  who  is  employed;  he 
must  live  in  Cleveland  and  he  must  have  taken  out  his 
first  citizenship  papers.  Preference  is  given  to  mar- 
ried men  and  returned  soldiers.  The  word  "he"  is 
used  literally  here.  It  means  what  it  says.  The  com- 
pany aims  to  pay  a  family  wage  and  endeavors  to  em- 
ploy family  men.  Much  of  the  work  could  be  per- 
formed by  women,  but  it  is  the  intention  of  the  com- 
pany to  use  only  men. 

There  is  in  the  White  Motor  plant  a  considerable 
amount  of  "service  work."  It  takes  the  usual  forms 
of  furnishing  lunch  and  medical  aid.  Then  there  is 
the  consultation  bureau  where  legal  aid  and  other 
forms  of  advice  are  dispensed  on  company  time.  The 
company  shows  that  this  is  no  loss  tO'  them  since  it 
furnishes  a  convenient  place  to  transact  the  necessary 
business  for  which  employees  might  otherwise  have  to 
lay  off  during  working  hours.  And  it  is  on  record 
that  the  men  themselves  once  petitioned  to  have  more 
men  in  the  Industrial  Service  Department  to  answer 


THINKING  AND  PLANNING  ii 

their  requests  in  order  that  they  need  not  spend  so 
much  time  away  from  their  work. 

The  foremen  and  all  executives  get  a  special  kind  of 
service  work.  It  is  one  hour  a  day  in  the  gymnasium, 
on  company  time,  and  it  is  mandatory.  If  a  foreman 
cannot  arrange  his  work  so  as  to  be  away  from  it  for 
an  hour,  he  is  not  the  kind  of  a  foreman  they  want. 
This  is  the  White  Motor  course  of  instruction  for  fore- 
men and  executives — it  gets  them  acquainted  with  each 
other  undressed;  it  keeps  them  in  splendid  physique; 
and  it  keeps  them  from  indigestion  ano.  getting  cross 
and  sour  with  their  workmen;  it  keeps  them  at  the 
top  notch  of  initiative  and  pep. 

The  educational  work  does  not  stop  with  the  shop. 
There  are  in  addition  the  classes  of  Americanization. 
Suspicion  need  not  be  aroused  here  with  regard  to 
employers'  propaganda.  The  man  at  the  head  of 
Americanization  is  a  man  of  liberal  thought.  He  at- 
tends national  Socialist  conferences  and  he  is  first  of 
all  a  teacher  and  an  American.  He  has  lived  in  this 
country  twenty  years.  There  are  only  thirty  men  out 
of  fifty-eight  hundred  employees  who  have  not  taken 
out  their  first  papers,  and  that  is  because  they  intend 
to  go  back  to  Europe  soon.  The  teacher  in  Ameri- 
canization has  connected  up  with  the  public  schools 
and  three  hundred  men  are  in  the  classes  an  hour  a  day 
on  their  own  time.  The  company  gives  them  fifteen 
minutes  on  company  time  to  wash  up  and  reach  the 
Public  School. 

The  cost  of  all  this  work  is  figured  out  for  the  men 
and  they  see  that  it  takes  eight  cents  a  day  from  their 
possible  wages.  But  they  see  that  it  adds  much  to 
their  actual  wages. 


12  INDUSTRIAL  GOVERNMENT 

Is  anything  more  needed  to  explain  why  they  work 
as  they  do?  What  is  back  of  it  all?  Not  a  strong 
union  with  power  to  secure  for  the  men  the  benefits  of 
increased  production.  Not  industrial  democracy. 
Not  a  premium  or  a  bonus. 

Nothing  but  a  knowledge  of  all  the  facts  which  the 
company  itself  possesses;  the  company's  verbal  assur- 
ance that  it  will  do  certain  things  in  the  future;  the 
company's  reputation  for  keeping  faith  with  employees 
in  the  past;  for  not  having  tried  to  "put  anything 
over,"  and,  added  to  this,  the  knowledge  that  the  com- 
pany has  not  weeded  out  of  its  employ  all  those  who 
disagree  with  the  present  industrial  system.  On  the 
contrary,  it  has  deliberately  encouraged  the  presence 
of  strong  and  trusted  leaders  of  the  people,  in  whom 
they  have  confidence  and  on  whose  judgment  and  in- 
tentions they  can  rely.  Real  power  is  here — poten- 
tial largely,  but  power  which  makes  it  possible  for  the 
men  at  the  White  Motor  to  accept  their  responsibility 
and  satisfaction  in  thinking  and  planning  for  the  fu- 
ture. 


II 

FAITH  IN  PEOPLE 

"The  industrial  miracle  of  the  age,"  John  D.  Rocke- 
feller is  reported  to  have  said  of  the  Ford  Motor  Com- 
pany. He  might  have  added,  the  psychological  miracle 
of  the  age.  The  industrial  end  is  amazing  enough. 
Three  completed  cars  moving  off  every  minute  on  their 
own  gasoline.  The  breadwinners  of  a  city  of  two 
hundred  and  fifty  thousand  at  work  in  one  factory. 

But  the  psychological  miracle  is  equally  miraculous. 
Ford  reversed  the  ordinary  psychology  of  industry. 
Instead  of  sharing  profits  with  employees  at  the  end 
of  the  year  he  shared  them  before  they  were  earned. 
Instead  of  carefully  selecting  employees  at  the  gates 
he  takes  them  as  they  come — gets  a  cross-section  of  the 
community — has  a  theory  that  he  must  carry  his  share 
of  the  maimed,  blind,  and  criminal,  because  somebody 
has  to  do  it  anyhow — believes  in  ordinary  plain  peo- 
ple as  they  come  along. 

This  is  not  scientific  and  is  not  business.  Accord- 
ing to  the  usual  ideas  Ford  ought  to  break.  They 
tried  to  prove  in  court  that  he  was  a  very  ignorant 
man  and  could  scarcely  even  read  and  write.  He 
needs  somebody  to  protect  him  against  himself.  And 
that  is  what  his  employees  are  doing. 

Ford  says,  in  effect,  to  anybody  who  gets  into  his 
works,   "How  much  do  you  think  you  are  worth?" 

13 


14  INDUSTRIAL  GOVERNMENT 

Well,  the  man  thinks  he  is  worth  a  little  more  than 
he  has  been  getting  elsewhere.  "Why,"  says  Ford, 
"that's  nothing.  Here  is  the  biggest  thing  in  the 
world.  We  are  going  to  sell  a  million  cars  a  year 
and  give  every  family  in  America  a  'Lizzie.'  If  you 
get  into  the  game  you  are  worth  twice  as  much,  ten 
times  as  much,  as  you  have  been  getting.  We  will 
pay  you  that  in  advance.     Now  go  to  it." 

And  just  the  ordinary,  everyday  man  rises  up  out  of 
himself  and  sees  himself  twice  as  big,  ten  times  as 
big,  as  he  had  ever  thought  possible.     He  goes  to  it. 

That  is  why  even  men  with  a  prison  record  have 
done  big  things  at  Ford's.  There  are  400  of  them 
and  the  majority  making  good. 

Two  thousand  men  go  around  with  labels,  "For 
light  work  only."  A  blind  man  does  the  work  of  three 
men.  The  fact  is,  everybody  turns  in  and  protects 
Ford  against  himself.  He  is  positively  too  demo- 
cratic for  this  world.  One  man  is  just  as  good  as  an- 
other, he  thinks.  That  certainly  is  not  business.  But 
behold,  you  see  ordinary,  common  men  doing  big  things 
at  Ford's. 

Of  course,  they  make  mistakes.  Ford  took  his  soci- 
ologists out  of  the  ranks,  and  they  certainly  did  raw 
work  for  a  while.  Ford  somewhere  had  gotten  an 
idea  that  what  he  wanted  as  workers  in  his  factory 
were  men  who  were  living  clean  and  wholesome  and 
constructive  lives.  So  he  did  not  care  to  have  em- 
ployees examined  as  to  their  efficiency — efficiency  was 
to  be  a  by-product  of  the  clean  and  wholesome  life. 
He  was  going  to  share  his  profits,  not  with  those  who 
got  out  the  work,  but  with  those  who  led  a  clean  and 
wholesome   life.     So  he   picked   out  his   sociologists 


FAITH  IN  PEOPLE  15 

from  the  ranks  to  investigate  and  find  out.  And  they 
went  into  the  homes,  investigating  and  re-investigat- 
ing everybody.  They  had  an  idea  that  that  was  the 
clean,  wholesome  and  constructive  life. 

Well,  after  about  three  years,  Ford  called  in  Dr. 
Marquis,  Dean  of  the  Episcopal  Cathedral,  and  spoke 
in  this  wise:  "There  is  too  much  of  this  snooping 
around  in  private  affairs.  We'll  change  this  from  a 
Sociology  Department  to  an  Education  Department — • 
you  take  charge.  You  know  what  I  want — clean  and 
constructive  life — but  cut  out  these  investigations  all 
except  those  that  really  need  further  assistance  and 
advice." 

And  that  is  what  Dr.  Marquis  has  been  doing.  He 
has  about  fifty  men  on  that  job. 

Then  about  the  4CX)  with  prison  records.  Ford  had 
an  idea  that  if  he  could  save  men  from  the  peniten- 
tiary they  would  make  good.  All  they  needed  was  a 
chance.  But  the  idea  did  not  work.  They  had  a  dif- 
ferent idea.  This  was  just  another  chance  to  get  off, 
and  so  they  took  advantage  of  it  and  went  on  with 
their  criminality.  Now  this  has  been  changed.  The 
Education  Department  takes  on  no  convicted  delin- 
quent until  after  he  has  served  his  term,  or  at  least  an 
appreciable  part  of  it.  He  must  take  his  medicine. 
Then  he  may  have  his  chance  to  make  good.  These 
four  hundred  are  assigned  to  a  confidential  adviser — 
a  kind  of  unofficial  parole  officer  attached  to  the  Edu- 
cation Department  of  the  factory.  So  Ford  tried  out 
his  theory  of  faith  in  human  nature,  rnd  his  Educa- 
tion Department  learned  how  to  protect  Ford  against 
himself. 

People  say,  "Oh  yes,  Ford  can  do  these  things  be- 


i6  INDUSTRIAL  GOVERNMENT 

cause  he  has  such  an  enormous  business.  There  is 
nothing  at  Ford's  that  can  teach  other  employers  any- 
thing in  any  ordinary  business  subject  to  competi- 
tion." 

Wrong  again.  Ford  got  his  enormous  business  be- 
cause he  did  these  other  things  first.  Ford  is  really  a 
plunger — a  plunger  in  social  psychology.  When  he 
started  his  profit-sharing  scheme  in  19 14,  he  had  14,000 
employees.  He  doubled  their  wages  with  a  bang — 
that  is,  he  doubled  the  wages  of  those  who  could  pass 
his  sociology  examination  on  the  clean  and  wholesome 
life.  In  August,  1919,  his  14,000  men  had  become 
53,000,  and  were  growing  at  the  rate  of  1200,  on 
an  average,  a  month.  The  first  year  after  he  doubled 
their  wages  he  made  more  net  profit  than  he  did  the 
year  before. 

How  was  it?  The  labor  turnover.  In  order  to 
keep  his  force  of  14,000  men  he  had  to  fill  the  places 
of  those  who  quit  with  new  men,  at  the  rate  of  50,000 
a  year.  The  next  year  after  he  put  in  his  new  plan 
he  had  to  hire  only  6508.  If  the  old  rate  of  labor 
turnover  were  to  keep  going  now  he  would  be  hiring 
196,000  men  a  year  to  keep  up  a  force  of  53,000.  But 
he  only  hires  at  the  rate  of  23,000  to  replace  those 
who  quit.  We  were  told  by  another  employer  in  De- 
troit that  the  turnover  in  foundries  that  summer  had 
been  20  per  cent  a  month.  In  Ford's  foundry  of  7000 
workers  it  was  running  at  6  per  cent  to  8  per  cent  a 
month.  The  average  turnover  for  all  departments 
ranged  from  3  per  cent  to  6  per  cent  a  month. 

Now,  the  cost  of  labor  turnover  is  something  huge. 
There  is  the  hiring  and  examination  of  applicants, 
the  files  of  records,  the  breakage  and  accidents  of  new 


FAITH  IN  PEOPLE  17 

employees,  the  teaching  and  training  and  fitting  them 
into  the  job,  most  of  all,  the  slowing  up  of  production. 
It  is  a  big  overhead  cost,  added  to  the  wages.  You 
might  credit  almost  the  entire  increase  in  efHciency  to 
that  item.  If  you  have  1000  men  in  a  single  gang 
then  the  speed  of  the  1000  is  limited  by  the  speed  of 
the  slowest.  And  if  3700  new  men,  the  former  pro- 
portion at  Ford's,  are  coming  into  that  gang  of  1000 
every  year  and  3700  are  leaving,  there  certainly  must 
be  a  lot  of  slow  men  holding  them  up.  But,  if  only 
five  hundred  or  less,  the  new  proportion  in  a  gang  of 
1000,  are  coming  and  going  for  a  year  then  you  begin 
to  get  team  work  and  can  reduce  the  size  of  the  gang, 
and  move  the  stuff  along. 

That  is  what  you  see  at  Ford's.  That  is  the  in- 
dustrial miracle.  It  follows  the  psychological  miracle. 
Innumerable  trolleys,  conveyor  belts,  tractors  and 
trailers,  carrying  multitudes  of  castings  to  appointed 
foregatherings  with  other  castings  and  parts.  Waist- 
high  assembly  carriers  do  away  with  lifting  and  bend- 
ing. In  the  foundry,  usually  the  bugbear  of  employ- 
ment managers,  endless  chains,  overhead  trolleys,  sus- 
tain the  weight  of  ladles;  sand-hoppers  in  the  ceiling 
do  away  with  back-breaking  shoveling;  electric  and 
magnetic  hoists  "hustle  the  pigs."  In  the  cylinder- 
casting  department  three  men  pour  what  scarce  yes- 
terday required  a  hundred. 

Throughout  the  factory  seven  hundred  men  are 
detailed  to  the  exclusive  task  of  keeping  the  place 
"policed  up,"  to  use  the  miUtary  phrase.  A  squad 
of  painters,  window-washers,  accident-preventers,  keep 
things  fresh  and  safe.  The  machine  shop  floor  is  as 
clean  as  a  kitchen.     Rough  stock,  though  accessible 


i8  INDUSTRIAL  GOVERNMENT 

to  the  operator,  is  piled  clear  of  the  aisles.  True,  many 
of  the  workers  are  close  together  where  detail  jobs 
are  contemporaneous.  Yet  the  entire  air-content  is 
changed  every  twelve  minutes.  In  the  foundry  power- 
ful down-drafts  and  sucking  blowers  carry  off  the 
smoke  and  gas. 

Some  people  say  that  the  men  are  "driven"  at 
Ford's.  A  scientific  manager  who  had  come  up  through 
machine  shops  elsewhere  had  told  us  he  never  saw  such 
speeding  up.  So  we  looked  for  it.  We  had  had  some 
experience  ourselves.  The  only  place  where  we  found 
it  was  in  some  parts  of  the  foundry.  There  one  might 
say  they  were  speeding  up.  The  machinery  did  it,  not 
the  boss.  But  those  7000  foundry  workers  are  nearly 
all  new  men.  In  October,  19 18,  the  foundry  had 
only  700  men.  Six  thousand  farmhands  from  Eu- 
rope learning  a  foundry  job  might  look  very  active, 
while  6000  who  have  got  their  pace  would  look  easy. 
And  there  were  so  many  of  them  who  were  easily 
at  work  that  the  driven  ones  caught  your  eye  as  ex- 
ceptions. 

Anyhow,  why  shouldn't  strong  men  work  hard  for 
eight  hours  at  75  cents  an  hour?  The  Steel  Corpora- 
tion pays  the  same  class  of  labor  40  cents  an  hour  for 
twelve  hours.  One  does  not  like  to  see  them  work 
that  hard  in  the  steel  mills.  And  the  enormous  turn- 
over shows  that  the  steel  -workers  do  not  keep  it  up. 
The  foundry  is  a  hard  job  anyhow — the  hardest  of 
all.  The  turnover  there,  at  Ford's,  is  8  per  cent  a 
month,  when  the  average  for  other  shops  in  the  works 
is  4,  5  or  6  per  cent.  If  a  foundry  turnover,  for  men 
who  have  been  employed  on  the  average  only  six 
months  can  be  kept  down  to  that  figure,  at  a  time  when 


FAITH  IN  PEOPLE  19 

labor  was  in  such  demand  as  it  was  in  the  summer 
of  1919,  it  would  seem  that  the  appearance  of  over- 
speeding  was  not  to  be  taken  too  seriously.  Of  course, 
men  work  hard  if  they  are  paid  enough. 

The  output  certainly  has  been  increased.  Hours 
were  reduced  and  profit-sharing  began  in  19 14.  Here 
are  typical  results  from  four  departments,  figured  on 
the  comparative  performance  of  the  same  number  of 
men  before  and  after. 

Motor — 100  in  nine  hours,  120  in  eight  hours. 

Radiator — 100  in  nine  hours,  169  in  eight  hours. 

Fender — 100  in  nine  hours,  155  in  eight  hours. 

Gasoline  tank — 100  in  nine  hours,  150  in  eight  hours. 

That  profit-sharing  scheme  is  a  curious  one.  Really 
that  is  a  wrong  name  for  it.  The  Ford  people  now 
call  it  "prosperity  sharing."  That  is  hardly  correct 
either.  It  does  not  depend  on  the  work  a  man  do€S. 
It  depends  on  the  way  he  lives  outside  working  hours. 
It  ought  to  be  called  a  citizenship  fund,  a  community- 
development  fund,  a  home-maker's  fund.  It  is  15 
cents  an  hour  devoted  to  faith  in  human  nature. 

It  is  the  payment  of  a  fixed  amount  to  each  worker, 
not  a  percentage  of  his  wages,  nor  a  pro-rated  distri- 
bution of  the  profits  of  the  concern.  It  has  strin"gs 
to  it,  but  these  strings  are  different  from  any  ever  tied 
to  profit-sharing.  It  does  not  depend  on  output,  nor 
upon  skill,  nor  upon  length  of  service.  It  is  based 
upon  the  value  of  the  individual  in  citizenship  and  in 
society.  It  is  not  based  on  how  much  a  man  brings  up 
the  average  production  of  the  factory,  but  upon  how 
much  he  brings  up  the  average  standards  of  the  com- 
munity, in  living,  in  thrift,  in  good  American  citizen- 
ship.    If  he  is  good  in  these  he  may  receive  today  in 


20  INDUSTRIAL  GOVERNMENT 

advance  the  profits  the  company  believes  he  will  bring 
in  tomorrow.  The  idea  is  that  every  man  wants  to  be 
a  sober,  capable,  industrious  citizen,  and  that  such  a 
man  is  the  best  investment  the  company  can  make. 

Married  men,  living  with  and  taking  good  care  of 
their  families,  receive  this  bonus  for  frugality.  Lads 
under  eighteen  may  also  receive  it  if  they  are  the  sup- 
port of  some  next  of  kin.  Single  men  of  eighteen  years 
who  are  known  to  be  living  wholesomely  and  construc- 
tively are  eligible.  Women  share  as  well  as  men.  All 
that  is  required  is  to  meet  the  company's  specifications 
of  good  citizenship.  The  Education  Department  at- 
tends to  it.  The  standards  are  not  petty.  When  the 
plan  took  effect,  sixty  per  cent  of  the  workers  immedi- 
ately shared  profits.  At  the  end  of  six  months  seventy- 
five  per  cent  were  sharing ;  after  one  year,  eighty-seven 
per  cent,  and  at  the  present  time  all  but  a  fraction  of 
one  per  cent  are  receiving  profits. 

In  October,  19 13,  the  men  were  first  really  classified 
according  to  their  skill.  Previously  there  had  been 
sixty  different  wage  rates.  November,  19 12,  saw  a 
labor  turnover  of  forty-two  per  cent  for  the  month. 
The  month  following  the  change  it  was  but  eight.  The 
men  had  been  freed  from  the  favoritism  and  partiality 
of  the  foremen.  At  the  time  that  the  sharing  system 
was  introduced,  the  lowest  wage  in  the  shop  was  thirty- 
four  cents  an  hour,  and  the  scale  ran  up  to  eighty  cents 
an  hour.  The  division  of  the  "profits"  being  primarily 
to  raise  the  standards  of  living  of  each  to  a  good  level, 
twenty-eight  and  one-half  cents  an  hour  was  given  to 
the  lowest  skilled,  and  seven  and  one-half  to  the  highest 
skilled.  It  was  presumed  that  the  totally  unskilled 
needed  more  elevation  than  the  man  who  was  getting 


FAITH  IN  PEOPLE  21 

a  higher  rate.  This  extreme  discrepancy  afterwards 
was  abandoned.  On  January  i,  1919,  the  minimum 
hourly  rate  was  raised  to  fifty  cents.  Sharing  profits 
was  then  changed  to  a  fixed  and  equal  amount  to  every 
man  regardless  of  skill,  and  determined  by  dividing 
the  total  hourly  division  of  profits  on  the  old  basis  by 
the  number  receiving  them.  Thus  the  average  share 
was  given  each  man.  The  schedule  adopted  in  May, 
19 19,  and  given  in  the  table  below,^  was  a  minimum 
hourly  rate  of  sixty  cents,  a  profit  payment  of  fifteen 
cents  an  hour,  and  a  classification  of  but  nine  different 
grades  of  skill. 

In  order  to  find  whether  a  man  was  entitled  to  re- 
ceive profits  or  not,  a  probationary  period  of  six  months 
in  the  employ  of  the  company  was  at  first  required.  At 
the  end  of  that  time,  if  there  was  promise  of  worth,  or 
intention  and  desire  to  "get  ahead,"  the  newcomer 
began  to  get  profits.  This  period  was  changed  in 
July,  19 19,  to  thirty  days.  It  was  found  that  accurate 
measurement  of  the  character  of  the  man  could  be 
made  in  that  time,  and  the  delay  of  six  months  was 
thought  to  discourage  some  of  the  probationers.  For 
the  administration  of  the  scheme  a  Sociological  De- 
partment was  organized  with  two  hundred  "inves- 
tigators"   drawn    directly    from    the   working    force. 


1 

Wage  Schedule. 

Effective   May  24,    191 

[9. 

Wage 

, — Hourly — • 

D      TT  V 

, Monthly  (25 

days) — , 

Profits 

Total 

Wage 

Profits 

Total 

Wage 

Profits 

Total 

.60 

•  15 

.75 

4.80 

1.20 

6.00 

120.00 

30.00 

150.00 

.6s 

•  15 

.80 

S-20 

1.20 

6.40 

130.00 

30.00 

160.00 

.70 

•  15 

.85 

S-6o 

1.20 

6.80 

140.00 

30.00 

170.00 

•75 

•  15 

.90 

6.00 

1.20 

7.20 

150.00 

30.00 

180.00 

.80 

.15 

•95 

6.40 

1.20 

7.60 

160.00 

30.00 

190.00 

.8s 

•  IS 

1.00 

6.80 

1.20 

8.00 

170.00 

30.00 

200.00 

.90 

•  15 

1.0s 

7.20 

1.20 

8.40 

180.00 

30.00 

210.00 

•95 

•  >S 

1. 10 

7.60 

1.20 

8.80 

190.00 

30.00 

220.00 

1. 00 

•IS 

I. IS 

8.00 

1.20 

9.20 

200.00 

30.00 

230.00 

22  INDUSTRIAL  GOVERNMENT 

Subsequently  the  name  of  the  department  was  changed 
to  Educational,  and  the  investigators  became  "advis- 
ors" because  of  the  hint,  conveyed  by  the  former  terms, 
of  prying  and  delving  into  the  intimate  relations  of  the 
home.    The  number  of  advisors  was  reduced. 

These  advisors  have  been  trained  through  actual 
work  and  selected  as  a  permanent  force  through  exami- 
nation for  originality,  personality,  tact,  clear  under- 
standing of  their  duties  and  of  the  ideals  of  the  plan. 
They  interview  the  new  employee  after  he  has  already 
been  hired  by  the  employment  department.  After  being 
hired,  this  newcomer  is  questioned  by  the  advisor  as 
to  his  financial,  domestic,  and  legal  status,  an  estimate 
is  made  of  his  character,  and  he  is  told  to  report  for 
work  the  following  morning.  The  next  day  the  ad- 
visor goes  to  his  home,  getting  further  information  of 
household  conditions,  life  of  the  children,  habits  of 
the  breadwinner,  in  fact  all  about  the  family  as  mem- 
bers of  society.  The  employee  and  his  wife  are  then 
shown  how  to  improve  their  conditions  and  their  mode 
of  living,  and  the  benefits  to  be  derived  are  set  forth 
to  them.  Photographs  are  shown  them  of  clean,  well- 
ordered  Ford  homes.  If,  at  the  end  of  thirty  days, 
they  show  evidence  of  desire  to  lay  up  for  the  future, 
sharing  of  the  profits  ensues.  At  first,  investigations 
to  check  up  followed  on  the  average  of  once  a  month, 
but  at  the  present  time,  unless  special  complaint  from 
one  source  or  another  indicates  that  there  is  some- 
thing wrong,  only  three  in  all  are  given.  These  are  the 
examination  at  hiring,  or  within  thirty  days  thereafter, 
the  one  five  months  later,  and  one  eighteen  months 
after  hiring. 

In  case  a  man  slips  below  the  specifications,  using 


FAITH  IN  PEOPLE  23 

destructively  rather  than  constructively  the  money  he 
receives,  he  is  penalized  through  refused  profits.  If  he 
"comes  back"  at  the  end  of  thirty  days  he  loses  noth- 
ing. If  it  takes  two  months,  he  loses  25  per  cent  of 
the  profits  for  the  period,  three  months  fifty  per  cent, 
and  so  on.  If  at  the  end  of  six  months  he  shows  no 
indication  of  reforming  to  methods  of  thrift  and  so- 
briety, his  discharge  is  automatic.  The  money  exacted 
in  these  penalties  goes  into  a  charity  fund  for  the 
alleviation  of  cases  of  especial  misfortune. 

The  activities  of  the  advisors  and  the  Educational 
Department  are  extensive.  A  chart  of  their  investiga- 
tions for  the  period  from  March  31  to  June  30,  19 19, 
gives  the  analysis  of  14,988  cases.  These  come  under 
108  different  subjects  and  were  provoked  from  twenty- 
two  different  sources  in  pubhc  institutions,  in  the 
company,  and  among  the  friends  and  families  of  the 
workers.  Thirty-one  cases  entailed  the  rendering  of 
advice  and  various  sorts  of  aid;  twenty  were  cases  of 
domestic  difficulties,  nineteen  were  violations  of  law 
and  of  company  rules,  while  7,700  cases  were  new  and 
rehired  men  and  1,558  were  reinvestigations.  The 
many  other  cases  ranged  from  legal  advice  all  the  way 
to  financial  relief.  One  employee  came  to  the  company 
saddled  with  a  $900  debt.  The  company  was  helping 
him  with  that  when  the  first  of  four  expensive  and 
quickly  successive  surgical  operations  look  him  from 
work.  He  finally  became  practically  paralyzed  and 
was  indebted  to  the  concern  over  $2,000.  About  the 
middle  of  last  September,  this  was  being  wiped  ofif 
the  books,  the  man  was  being  sent  to  expert  medical 
lattention  for  his  serious  condition,  and  efforts  were 


24  INDUSTRIAL  GOVERNMENT 

being  made  to  help  the  wife  and  mother  to  help  herself, 
a  suitable  position  being  given  her  in  the  factory. 

The  Ford  scheme  of  industrial  government  has  noth- 
ing of  unionism,  or  shop  committees,  or  collective  bar- 
gaining, or  "industrial  democracy."  It  is  just 
old-fashioned  industrial  autocracy  tempered  by  faith 
in  human  nature.  It  is  plain  that  no  scientific  system- 
atizer  laid  out  that  labor  department.  The  labor 
department  is  not  a  department,  it  is  a  lot  of  inde- 
pendent activities  that  were  started  wherever  something 
was  not  going  just  right,  and  so  somebody  was  picked 
out  of  the  factory  to  specialize  on  that  point.  There 
is,  for  example,  a  little  department  of  about  thirty 
men  that  does  not  know  what  to  call  itself,  whether  a 
grievance  committee,  or  a  supervisor  of  foremen,  or  a 
training  school  or  a  transfer  department,  or  a  branch 
of  an  educational  department,  or  a  trouble  department. 
It  just  grew  up  as  a  specialty  in  dealing  with  troubles 
between  foremen  and  employees.  An  employee  cannot 
be  discharged  from  the  Ford  works  without  great 
formality  and  final  action  by  a  committee  representing 
the  education  department  and  the  general  management. 
During  the  year  1919  only  118  men  were  discharged. 
Hence,  if  a  foreman  wants  to  get  rid  of  a  man  it  is 
liable  to  involve  the  whole  factory  clear  up  to  the  top. 
Somebody  must  look  into  the  matter  and  fix  it  up  with 
the  foreman,  or  find  another  foreman  to  take  the  man, 
or  talk  with  the  man.  So  this  trouble-man  becomes  a 
labor  adjuster,  a  personal-relation  expert^  and  he  has 
a  staff  and  an  office  and  clerks  with  files,  and  the  files 
give  a  line  on  each  one  of  the  2,000  foremen,  and  the 
foreman  who  has  trouble  looms  up,  and  the  general 
management  begins  to  inquire  whether  he  is  fit  to  be 


FAITH  IN  PEOPLE  25 

a  foreman.  Thus  the  grievance  department  evolves 
into  an  investigating  bureau,  an  advisory  board  to  the 
general  superintendent  on  the  qualifications  of  fore- 
men, and  advisory  to  the  education  department  on 
whether  the  v^^orkman  is  living  the  clean  and  wholesome 
life. 

Why  should  there  be  any  industrial  democracy  or 
workmen's  grievance  committee,  or  labor  organiza- 
tions, when  nobody  can  be  fired  anyhow,  and  when  this 
advisory  committee  of  thirty  is  always  on  the  job  in- 
vestigating trouble  long  before  it  ripens,  and  when  the 
management  always  has  a  line  on  the  foremen  who 
have  too  much  trouble?  It  all  goes  back  to  faith  in 
people  and  ends  in  a  trouble  department  to  make  re- 
pairs where  something  goes  wrong  in  the  exercise  of 
faith. 


Ill 


FROM   SCIENTIFIC  MANAGEMENT  TO 
PERSONAL  RELATIONS 

The  American  business  man  is  usually  thought  of 
as  hard-headed,  intensely  practical  and  unsentimental. 
As  a  matter  of  fact  he  is  probably  ruled  by  sentiment, 
even  by  religion,  to  a  far  greater  extent  than  we 
realize. 

Witness  the  Link-Belt  Company  of  Philadelphia, 
Chicago,  and  Indianapolis,  where  there  has  been  a  con- 
scious development  from  pure  scientific  management 
to  humanism  in  management;  from  figures  to  feelings 
as  the  instruments  of  control. 

We  visited  the  Philadelphia  establishment.  Twenty 
years  ago  this  concern  was  one  of  the  first  to  intro- 
duce the  Taylor  system  of  scientific  management,  under 
the  supervision  of  Frederick  W.  Taylor  himself;  with 
some  modifications,  to  be  sure,  owing  to  the  fact  that 
this  concern  manufactures  special  orders  and  not  staple 
products,  but  essentially  the  Taylor  system  with  its 
functional  foremen,  time  and  motion  study,  minute 
cost  determinations  and  the  rest. 

The  nine  hundred  and  odd  workmen  were  scientifi- 
cally adjusted  to  their  jobs,  shop  routine  was  carefully 
and  thoroughly  established,  and  the  men  worked  at  a 
swift,  steady  pace.  The  worker  who  failed  to  come 
up  to  the  standard  of  performance   found  that  his 

26 


PERSONAL  RELATIONS  27 

earnings  were  so  small  that  he  did  not  wait  to  be  dis- 
charged. He  quit  and  sought  work  where  he  could  go 
it  at  a  slower  paCe.  The  worker  who  remained  pro- 
duced in  large  quantities  and  made  better  than  average 
earnings. 

Costs  were  kept  in  such  minute  detail  that  opera- 
tions of  so  little  duration  as  105  seconds  were  recorded 
as  separate  units.  Labor-hour  costs  were  recorded  at 
their  actual  cash  costs.  Value  of  buildings,  equipment, 
tools  and  machinery,  were  allocated  to  separate  work- 
men and  unit  processes  with  accuracy.  Every  instruc- 
tion was  written  and  carefully  recorded.  Orders  and 
results  passed  by  writing,  and  even  human  relations 
were  controlled  finally  by  paper  forms..  For  every  act 
and  process  there  was  a  form  which  required  careful 
filling  out.  The  processes  and  relations  were  as 
mechanical  as  the  Taylor  system  could  make  them. 

This  required  an  immense  amount  of  work,  re- 
writing bills  of  material,  making  thousands  of  entries; 
costs  were  always  at  least  a  week  behind  the  labor 
date.  A  thorough  study  of  their  methods  and  recogni- 
tion of  faults  resulted  in  a  number  of  changes :  the  use 
of  a  single  bill  of  materials,  a  distinctive  time  card  for 
each  separate  form  of  production  labor,  and  a  uniform, 
general  method  of  distributing  indirect  expenses.  Sell- 
ing costs  were  kept  apart  from  the  rest.  Thus  the  work 
was  materially  reduced  and  accuracy  sufficient  for  prac- 
tical purposes  retained. 

While  they  still  have  scientific  management  it  is  so 
modified  that  it  can  no  longer  be  called  the  Taylor  sys- 
tem.    It  is  the  Link-Belt  system. 

In  the  planning  department  there  have  been  probably 
the  fewest  changes.     Here  we  find  scientific  manage- 


28  INDUSTRIAL  GOVERNMENT 

ment  par  excellence,  likewise  in  the  cost-accounting  and 
stores  departments.  The  work  is  carefully  planned, 
instructions  are  made  out  in  copies  sufficient  for  each 
of  the  employed  workers  on  each  job,  and  accurate  time 
studies  are  made  and  recorded.  Their  purpose,  how- 
ever, is  more  to  make  possible  intelligible  cost  accounts 
and  job  estimates  than  to  maintain  rigorous  paper 
control  over  the  shops. 

The  greatest  variation  from  scientific  management 
has  probably  been  in  the  personal  relations  with  the 
men.  This  plant  has  always  tried  to  give  the  workers 
a  consciousness  that  the  management  was  interested 
in  their  welfare  and  a  fair  deal  for  everyone  :  the  efifort 
has  always  been  apparent  to  give  the  men  all  that  is 
coming  to  them,  to  recognize  their  interest  in  the  plant. 
It  is  easy  to  understand,  therefore,  that  the  manage- 
ment would  early  feel  that  the  Taylor  system  went  too 
far  with  its  functionalization,  particularly  with  respect 
to  foremen.  And  they  returned  to  the  system  of  a 
single  superintendent  with  general  foremen  and  sub- 
foremen,  each  in  complete  charge  of  his  particular 
group  of  workmen. 

This  foreman  has  all  the  functions  of  the  old  type 
of  foreman,  with  slightly  less  emphasis  on  the  personal 
relation  side.  He  can  recommend  for  discharge,  but 
his  discharge  is  not  final.  He  is  still  the  gang  boss, 
with  the  responsibility  of  "getting  out  the  goods,"  but 
is  primarily  an  instructor  and  executive. 

The  interesting  development  in  this  concern  is  the 
changed  type  of  superintendent.  Contrary  to  general 
practice,  he  is  not  the  technical  type  of  man.  He  did 
not  forge  his  way  up  through  the  ranks  of  factory 
workers  to  his  present  position.     He  was  a  cost  ac- 


PERSONAL  RELATIONS  29 

countant  with  an  attractive  personality,  a  man  of 
impelling  presence.  He  is  superintendent,  not  because 
he  knows  the  technical  side  of  manufacturing,  but  be- 
cause he  knows  and  can  handle  men,  because  of  his 
great  and  evident  human  sympathy.  The  responsibility 
for  matters  technical  is  left  to  his  foremen  and  sub- 
foremen. 

His  training  school  for  this  present  position  was  a 
Sunday  School.  He  was  a  whirlwind  of  a  superin- 
tendent there.  His  school  was  live  and  interesting. 
Mothers  sent  their  sons  to  him.  He  reformed  recalci- 
trants. He  built  his  whole  soul  on  making  everyone 
feel  happy,  contented,  and  anxious  to  do  things. 

So  when  the  management  of  the  Link-Belt  Company 
saw,  a  few  years  ago,  that  they  were  facing  a  peculiarly 
difificult  labor  situation,  they  decided  that  they  must 
change  their  tactics.  They  decided  to  pin  their  faith 
on  the  man  who  showed  that  he  could  inspire  and  lead 
his  fellows,  who  could  preach  a  sermonette  to  an  im- 
ported workman  in  greasy  overalls  without  evoking 
indifferent  suspicion  in  response.  The  technical  side 
of  the  problem  could  be  left  to  his  lieutenants.  It  was 
subordinated  to  the  human  relations  aspect  of  the  gen- 
eral manufacturing  problem. 

Not  that  this  factory  has  become  a  revival  camp 
meeting  with  a  chorus  of  "Glory  Halleluiahs"  for 
every  achievement  in  production.  Far  from  it.  En- 
thusiasm has  not  replaced,  it  has  supplemented  hard 
sense  and  technical  skill.  The  superintendent  with  his 
foremen  meet  every  morning,  and  at  this  meeting  each 
man  reports  the  progress  of  work  in  his  department. 
Technical  difficulties,  failures  to  hold  up  to  the  sched- 
ule,    failures    to    coordinate — these    and    more    are 


30  INDUSTRIAL  GOVERNMENT 

discussed  to  the  end  that  each  knows  just  what  the  rest 
are  doing,  just  where  he  stands,  and  what  is  expected 
of  him.  It  would  go  hard  with  the  foreman  who 
showed  in  these  meetings  any  shortcomings  as  a 
technician. 

The  technical  side  of  the  work  is  foundational.  On 
it  rests  all  else.  But  it  is  the  peculiar  function  of  the 
superintendent,  through  these  meetings  and  through 
personal  contacts  with  the  workmen  themselves,  to 
build  and  maintain  a  high  esprit  de  corps,  to  keep  the 
machinery  of  production,  including  the  human  element, 
well  coordinated,  running  at  high  speed  and  without 
friction. 

Once  a  week  the  same  group  holds  a  meeting  to  take 
up  pure  labor  questions,  such  as  welfare,  accidents, 
discipline.  This  is  a  non-technical  meeting  for  the 
discussion  of  human  relations,  and  through  it  the 
superintendent  aims  to  build  up  his  sub-executives  as 
managers  of  men — and  at  the  same  time  keep  himself 
informed  and  fit. 

The  foremen  do  not  fire.  That  is  left  for  the  super- 
intendent. A  workman  was  caught  manipulating  his 
time  card.  They  pay  both  hour  and  piece  rates,  the 
latter  for  the  higher  and  better-paying  types  of  work. 
This  workman  so  made  out  his  time  card  that  it  showed 
a  less  number  of  hour-rate  jobs  and  larger  number  of 
piece-rate  jobs  than  he  had  actually  performed.  Of 
course  he  was  detected.  He  was  called  before  the 
superintendent  and  given  a  lecture  on  stealing,  lying, 
and  cheating.  He  was  told  that  he  would  be  given 
another  chance  and  no  more.  The  men  in  the  shop 
were  given  to  understand  that  this  man  was  on  proba- 


PERSONAL  RELATIONS  31 

tion,  and  he  went  back  to  work,  with  a  hearty  slap  on 
the  shoulder  from  the  superintendent. 

A  little  later  he  was  again  detected  in  the  same  trick. 
This  time  he  was  called  in,  reminded  of  his  former 
offense,  and  the  warning  then  given  him,  and  dis- 
charged. Notice  of  his  discharge  and  the  reason  for 
it  were  given  the  men.  Appeals  from  the  discharged 
worker's  family  failed  to  move  the  superintendent. 
"He  had  his  chance,  he  was  warned,  and  if  I  did  not 
stick  to  my  word  the  whole  organization  would  go  to 
pieces."     This  was  final. 

The  superintendent  walks  out  through  the  shops,  call- 
ing men  by  their  first  names.  He  takes  a  personal  in- 
terest in  their  personal  problems.  Mothers  who  meet 
him  in  church  send  him  their  boys  and  he  employs  them. 
He  is  the  great,  pulsing  heart  of  the  management, 
carrying  its  interest  in  the  men  directly  to  them,  build- 
ing a  great  family  in  the  factory. 

And  the  result  ?  Over  eight  hundred  workers  stead- 
ily on  the  job — at  increased  wages  to  be  sure — but 
also  with  increased  output.    The  turnover  is  low. 

Where  is  the  union  all  this  time?  There  isn't  any, 
officially.  Although  this  company,  in  one  of  its  four 
plants,  operates  a  shop  closed  against  union  men,  be- 
cause of  the  aggressive  attitude  of  certain  unions,  here 
in  Philadelphia  it  finds  the  unions  less  objectionable. 
It  operates  an  open  shop,  making  no  discrimination 
between  union  and  non-union  men. 

The  management  here  takes  the  position  that  men 
cannot  at  all  times  be  loyal  to  both  their  employers  and 
their  union,  and  in  the  past  has  put  it  up  to  the  men 
on  just  this  basis.  A  group  of  workers  came  and  ex- 
pressed the  desire  to  organize. 


32  INDUSTRIAL  GOVERNMENT 

"Why  ?"  asked  the  management.  Well,  the  men  did 
not  exactly  know,  but  they  thought  they  wanted  a 
union. 

"Suppose  the  union  officials  out  of  town  order  you 
to  strike,  even  though  you  have  no  grievance  against 
this  management?  What  would  you  do?"  asked  the 
manager. 

The  men  protested  that  they  would  stick  to  the 
company. 

"And  be  disloyal  to  your  union?"  said  the  manager. 
"If  you  are  disloyal  to  your  union,  how  can  we  be  sure 
you  will  not  be  disloyal  to  us?  Be  union  men,  if  you 
must,  but  you  are  through  here."  The  men  were  sur- 
prised, but  saw  the  point.     The  matter  was  dropped. 

The  less  aggressive  policy  of  the  unions  in  Phila- 
delphia may  be  explained  by  the  fact  that  the  men  are 
well  paid.  The  general  labor  situation  is  better  than 
elsewhere,  wages  having  kept  pace  with  the  cost  of 
living.  Wages  in  this  plant  run  as  high  as  $3,000  per 
annum  for  ordinary  skilled  workers,  $1,800  being  a 
common  wage. 

The  interest  of  the  management  in  its  workers  as 
humans  is  undoubtedly  a  factor  in  the  healthy  situa- 
tion in  this  plant.  Effort  is  being  made  constantly 
to  evoke  a  more  earnest  interest  in  the  business  and 
this  interest  is  rewarded.  Absentee  ownership  is  recog- 
nized as  an  evil,  and  conscious  effort  is  being  made  to 
retain  control  of  the  plant  within  the  ranks  of  those 
actively  engaged  in  it.  They  are  planning  to  divide 
profits  with  their  employees  on  a  stock-participation 
basis.    This,  briefly,  is  the  plan. 

They  have  a  property  capitalized  at  six  and  a  half 
million  dollars.     The  physical  value  of  the  property  is 


PERSONAL  RELATIONS  33 

at  least  nine  million  dollars.  The  reason  for  this  is 
that  there  never  has  been  any  water  in  the  stock.  They 
have  always  paid  not  to  exceed  eight  per  cent  on  the 
investment.  The  result  is  that  they  have  a  big  property 
account  which  is  far  in  excess  of  their  capitalization. 
This  they  have  accomplished  by  putting  profits  back 
into  the  business  instead  of  out  as  dividends,  thereby 
expanding  and  developing  the  business  out  of  earnings. 

There  is  here  apparently  no  attempt  to  camouflage. 
There  is  no  industrial  democracy  with  a  lot  of  strings 
attached,  no  committee  system.  It  is  a  strict  open  shop, 
paying  no  attention  to  labor  unions,  but  endeavoring  at 
all  times  to  maintain  close  human  relationship  between 
men  and  management. 

The  general  manager  does  not  barricade  himself  in 
a  private  ofiice  with  a  screen  of  clerks  and  secretaries. 
He  sits  in  a  large  office  with  several  hundred  executives 
and  clerks.  He  has  a  kind  of  horseshoe  desk  on  a 
platform  at  one  end  of  the  room  and  everybody  can  tell 
whether  he  is  on  the  job  or  not.     He  is  accessible. 

The  superintendent  mixes  personally  with  the  men. 
Their  troubles  are  his  troubles.  No  grievance  is 
strangled.  Everyone  gets  a  fair  hearing,  and  through 
the  daily  meetings  of  the  foremen  a  splendid  esprit  de 
corps  is  maintained. 

How  far  an  executive  may  wisely  go  in  this  policy 
of  slapping  shoulders  and  calling  men  by  their  first 
names  is  an  open  question.  The  president  of  the  com- 
pany is  concerned  over  it.  At  another  plant  of  this 
company  there  is  a  superintendent  who  is  anything  but 
a  human  nature  expert.  He  cannot  bring  himself  to 
be  familiar  with  his  workers,  to  speak  to  them  as  he 
goes  through  the  plant.     He  is  a  keen  technician,  his 


34  INDUSTRIAL  GOVERNMENT 

eyes  miss  little,  he  is  a  splendid  organizer  of  technical         || 
details,  he  is  fair  and  just,  but  he  is  not  a  good  fellow 
with  the  men.     Yet  his  plant  runs  smoothly,  and  pro- 
duction is  maintained.     He  avoids  the  suspicion  that 
he  is  trying  to  slip  something  over  by  smooth  talk,  and         | 
if  there  is  less  of  fellowship  in  his  reign,  there  is  better  I 

discipline,  and  a  general  conviction  that  the  men  will  1 

get  a  square  deal. 

The  two  experiments  are  going  on ;  the  management 
is  watching.    The  verdict  is  not  yet  declared. 


IV 
MEASUREMENT  OF  MOTIVES 

In  a  great,  well-lighted  structure,  nimble  fingers 
are  guiding  hundreds  of  garments  under  the  needles 
of  power-driven  sewing  machines.  A  quick  turn,  a 
break  of  the  thread,  a  toss  to  the  left  while  picking 
up  another  garment  at  the  right,  and  each  girl  bends 
forward  again  as  the  cloth  speeds  through  the  machine. 

In  rapid  succession  girl  after  girl  arises  from  her 
place,  carries  the  bundle  of  garments  she  has  sewed 
over  to  a  nearby  table,  walks  to  the  control  board  in 
the  center  of  her  division,  has  her  work  recorded  and 
receives  another  batch  of  garments  to  work  on. 

They  work  hard,  these  girls,  and  they  work  steadily. 
The  garments  literally  flow  through  the  shop  in  an  un- 
broken stream.  One  gains  the  impression  that  some 
omniscient  being  has  arranged  all  the  machinery,  so 
delicately  adjusting  its  parts  that  everything  operates 
in  perfect  coordination  and  balance  with  every  other 
part. 

For  this  group  of  six  hundred  workers,  most  of 
whom  are  women  and  girls,  the  turnover  for  employees, 
after  the  probation  period  of  five  days,  has  averaged 
about  5  per  cent  per  month  over  a  period  of  six  years, 
the  range  being  between  33.5  per  cent  and  67.02  per 
cent  per  year.  The  absentees  average  about  2  per 
cent  per  day,  and  many  of  the  women  are  married  and 

35 


36  INDUSTRIAL  GOVERNMENT 

have  their  own  homes.  More  than  two-thirds  of  the 
entire  group  have  been  employed  here  more  than  a 
year,  while  over  15  per  cent  have  served  ten  years  or 
longer.  The  workers  are  healthy,  their  appearance  is 
neat  and  business-like.  There  are  no  strikes,  produc- 
tion has  steadily  mounted,  and  wages  have  increased 
more  than  the  increase  in  labor  costs.  The  factory 
runs  with  the  full  force  the  year  around. 

Joseph  &  Feiss,  Cleveland,  Ohio,  understood  the  art 
of  designing  clothes  and  measuring  cloth  to  fit  the 
pattern  so  as  to  utilize  most  of  the  cloth.  Likewise, 
they  designed  the  kind  of  an  operative  force  they  needed 
for  their  business  and  proceeded  to  measure  the  human 
beings  to  fit  the  design. 

They  needed  work  done  in  large  quantities.  It  had 
to  be  well  done.  It  had  to  meet  competition.  It  had 
to  be  produced  at  low  costs.  They  needed  to  produce 
garments  which  would  sell. 

If  the  factory  could  be  kept  running  without  lay- 
offs one  great  source  of  loss  could  be  overcome;  it 
would  mean  less  waste  of  overhead  expense  and  smaller 
turnover  of  labor.  But  it  was  difficult  to  accomplish 
this  so  long  as  dealers  bought  goods  in  season  and 
so  long  as  changes  of  style  made  over-production  an 
ever-present  menace. 

They  proceeded  to  educate  their  salesmen  and  their 
trade.  First  their  materials  and  later  their  styles  were 
standardized  to  meet  a  certain  extensive  conservative 
demand,  principally  for  the  more  serviceable  and  every- 
day men's  clothing.  These  models  change  very  little, 
standardization  lowers  the  cost,  and  it  becomes  feasible 
to  manufacture  the  garments  before  they  are  actually 
sold  rather  than  wait  for  orders.    They  develop  their 


MEASUREMENT  OF  MOTIVES  37 

market  to  absorb  a  year-round  production  and  make 
possible  the  economies  of  continuous  production. 

Fitting  the  operative  force  to  the  production  design 
meant  a  measurement  of  human  motives.  How  can  you 
induce  Lizzie  Meyers  to  fit  herself  in  with  a  scheme  of 
scientific  production,  appear  for  work  on  time  every 
morning  and  work  steadily  for  the  entire  day?  How 
can  you  get  her  to  keep  the  quality  up  and  the  stream 
of  production  unimpeded,  at  the  same  time  keeping  her 
happy  and  loyal,  willing  to  remain  in  your  employ  even 
when  another  employer  tries  to  attract  her  to  his  com- 
pany? 

Lizzie  is  a  bundle  of  motives  and  if  you  appeal  to 
the  proper  motives  with  just  the  requisite  appeal  you 
win;  if  not  you  lose. 

But  you  cannot  measure  motives  with  a  yard  stick 
as  you  can  cloth.  Incentives,  motives,  human  willing- 
ness to  do  things,  all  grow  out  of  mental  states.  It 
was  discovered,  however,  that  you  can  measure  mo- 
tives in  terms  of  dollars  and  cents.  For  money  makes 
possible  the  gratification  of  most  desires  and  provides 
a  measure  of  the  attitude  of  human  beings  to  each 
other. 

The  management  of  Joseph  &  Feiss  found  that  in- 
equalities in  pay  among  their  workers  rankled  even 
more  than  the  fact  of  larger  pay  elsewhere.  The  girls 
who  felt  that  they  were  discriminated  against  lost  in- 
terest in  their  work;  they  talked,  and  the  dissatisfaction 
which  resulted  lowered  the  morale  of  the  shop. 

Justice,  then,  is  one  of  the  motives  which  needs  to  be 
measured.  Instead  of  leaving  the  hiring,  firing  and 
promotion  to  forty  different  foremen  with  forty  differ- 
ent standards  and  all  manner  of  prejudices  and  favorit- 

44591 


38  INDUSTRIAL  GOVERNMENT 

isms,  a  single  department,  the  Employment  and 
Service  Department,  with  a  single  standard  for  all 
workers,  supervises  relationship  between  the  company 
and  its  employees.  An  open  channel  to  the  manager 
through  their  own  elected  representative  provides  the 
machinery  for  hearing  complaints.  With  the  removal 
of  all  signs  of  inequality  and  discrimination,  providing 
the  same  measure  of  rewards  for  all  employees,  the 
dissatisfaction  of  Miss  Lizzie  Meyers  and  her  kind 
disappears. 

It  was  recognized  that  work  must  be  paid  for  in 
accordance  with  the  difficulty  involved,  the  skill  re- 
quired, the  degree  of  agreeableness  or  disagreeableness 
and  the  importance.  The  management  further  recog- 
nized that  the  basic  amount  to  be  paid  was  a  question 
for  bargaining,  since  judgment  as  to  difficulty  or  dis- 
agreeableness or  importance  varies  with  the  individual. 
So  they  arrived  through  investigation  and  discussion 
at  what  was  believed  to  be  a  fair  wage  per  hour  for 
each  kind  of  work.  In  1914,  the  average  for  men — 
excepting  cutters,  markers  and  trimmers — was  $13.35 
per  week.  In  19 18  the  average  was  $24.37.  In  191 9, 
it  was  $28.09.  Women's  average  earnings  were  $9.28 
in  1914,  $15.90  in  1918,  and  $18.25  '^^  I9i9-  These 
are  actual  earnings  determined  by  dividing  the  total 
annual  earnings  by  fifty-two;  and  so  include  vacation 
week,  sickness,  and  any  shutdown  or  lay-off.  The 
earnings  for  markers,  cutters,  and  trimmers  are  ap- 
preciably higher. 

Suppose  we  say  that  a  coat  baster  should  receive  60 
cents  per  hour.  But  on  the  amount  of  work  to  be  done 
to  earn  the  60  cents,  the  firm  was  not  willing  to  bar- 
gain.   This  was  not  a  matter  of  judgment  or  higgling; 


MEASUREMENT  OF  MOTIVES  39 

it  was  a  matter  for  measurement.  An  actual  test 
showed  how  many  operations  could  be  performed  in  an 
hour.  Allowance  is  made  for  interruptions,  personal 
needs  and  the  like,  and  a  standard  performance  deter- 
mined. Thus  while  Miss  Lizzie  Meyers  might  have 
produced  fourteen  basted  coats  in  an  hour,  due  allow- 
ance would  lower  the  amount  set  as  a  standard,  let  us 
say  to  ten.  The  rate  of  pay  then  becomes  six  cents 
per  garment,  and  the  standard  worker,  producing  her 
ten  garments  per  hour,  earns  the  agreed-upon  sixty 
cents. 

The  worker  who  actually  meets  the  standard,  how- 
ever, is  given  additional  compensation  in  the  shape  of 
a  20  per  cent  "production  bonus,"  and  she  would  earn 
seventy-two  cents  instead  of  sixty  cents.  The  com- 
pany states  that  at  the  present  time  over  70  per  cent 
of  the  workers  are  making  the  production  bonus  regu- 
larly. 

There  is  also  a  "quality  bonus."  For  each  kind  of 
work  there  is  determined  a  maximum  number  of  re- 
jections to  be  allowed  the  worker,  the  number  depend- 
ing upon  the  speed  and  kind  of  operation.  If  the 
worker  exceeds  this  schedule,  that  is,  falls  below  the 
standard  of  quality  required,  she  is  paid  no  quality 
bonus.  If  she  reaches  or  passes  the  standard  she  is 
paid  a  bonus  up  to  10  per  cent  of  her  earnings  for 
perfect  performance.  She  need  not  maintain  the 
standard  continuously  to  earn  a  bonus,  but  is  paid  a 
bonus  for  the  aggregate  of  the  hours  for  which  she 
attains  or  exceeds  the  standard. 

In  order  to  keep  the  workers  interested  in  pursuing 
the  prize  the  management  helps  them  to  qualify  in 
skill,  or  to  find  the  kind  of  work  for  which  their  natural 


40  INDUSTRIAL  GOVERNMENT 

aptitude  will  fit  them.  A  business-like  young  woman, 
who  has  the  position  of  supervisor  of  production,  keeps 
in  close  touch  with  the  workers  all  day,  encouraging, 
helping  where  she  can. 

College-trained  women  fill  many  of  the  executive 
positions.  The  management  has  learned  that  the 
higher  type  of  executive,  with  the  necessary  ability 
and  the  mind  trained  to  gauge  human  motives,  is  often 
developed  more  easily  from  the  product  of  the  college 
class-room  than  from  the  ranks  of  experienced  opera- 
tives in  the  industry.  Given  the  same  opportunity, 
and  possessing  the  perseverance  essential  to  acquiring 
practical  experience,  the  college-trained  aspirant  is 
likely  to  win  out. 

The  worker  during  the  first  weeks  of  employment 
is  likely  to  become  discouraged,  and  if  paid  by  the 
piece  would  not  earn  enough  to  pay  her  board  for  sev- 
eral weeks.  To  meet  this  discouragement,  the  manage- 
ment divides  the  pay  of  the  worker  into  two  parts, 
called  the  "Retainer"  and  the  "Expectancy."  Suppose 
a  girl  is  put  on  an  operation  worth  fifty  cents  per  hour. 
Being  a  beginner  she  is  not  expected  to  produce  the 
amount  of  work  which  would  entitle  her  to  the  pay, 
but  she  is  expected  to  earn  part  of  it.  So  they  pay 
her,  let  us  say,  thirty  cents  per  hour  for  a  "retainer" 
and  expect  her  to  earn  twenty  cents  at  the  piece  rate 
for  that  operation.  The  twenty  cents  is  called  "expec- 
tancy," and  is  earned  in  whole  or  part  as  the  worker 
measures  up  to  the  learning  standard.  As  the  worker 
progresses  the  "retainer"  goes  down  and  the  "expect- 
ancy" increases,  that  is,  the  guaranteed  rate  decreases 
and  the  standard  of  performance  is  raised. 

The  same  method  is  used  when  a  girl  is  taught  a 


MEASUREMENT  OF  MOTIVES  41 

new  operation.  For,  mind  you,  the  management  is 
bent  upon  having  every  worker  familiar  with  several 
operations,  so  that  the  absence  of  a  worker  does  not 
prevent  her  operation  from  being  performed.  This 
scheme  makes  possible  the  balancing  of  all  departments 
so  that  the  flow  of  work  is  continuous  and  regular  in 
quantity:  which  would  not  be  the  case  if  Department 
A  were  fully  manned  while  Department  B  had  only 
one-half  its  force  at  work. 

The  worker,  while  being  taught  this  new  operation, 
is  not  penalized  for  loss  of  production,  but  is  given 
a  "retainer"  to  compensate  for  the  possible  loss. 
Again,  increasing  familiarity  with  the  operation  re- 
duces the  "retainer"  and  increases  the  "expectancy." 
This  "retainer"  is  in  effect  an  instruction  bonus. 

An  "attendance  bonus"  invokes  regularity  and  helps 
to  keep  the  productive  machinery  balanced.  For  each 
unbroken  consecutive  day  of  work  the  worker  gets  a 
bonus  of  fifty  cents.  For  each  absence,  she  fails  to 
make  the  fifty  cents  attendance  bonus  for  the  first  day 
following  the  absence.  Thus,  if  Lizzie  Meyers  worked 
on  Monday,  Tuesday  and  Wednesday,  she  received 
fifty  cents  bonus  for  each  day.  But  if  she  is  absent 
on  Thursday,  works  on  Friday  and  also  on  Saturday, 
she  loses  her  Thursday  bonus,  by  reason  of  being  ab- 
sent on  that  day,  and  loses  also  her  Friday  bonus,  the 
first  day  of  her  attendance,  but  earns  her  bonus  on 
Saturday. 

There  is  additional  inducement  offered  in  the  "ex- 
cuse bonus."  It  may  be  that  Lizzie  was  sick  on  Thurs- 
day and  called  up  the  firm  before  nine  in  the  morning; 
or  she  may  have  had  to  stay  home  and  help  with  the 
washing,  or  wanted  to  go  to  a  funeral,  and  knowing 


4JJ  INDUSTRIAL  GOVERNMENT 

this,  secured  an  excuse  from  her  foreman  and  the 
Service  Department.  Or  she  may  have  gone  home 
without  completing  the  day's  work,  but  secured  an 
excuse  for  her  absence.  In  any  of  these  cases  half  of 
her  attendance  bonus  is  given  her  on  Friday,  that  is, 
the  "excuse  bonus"  nets  her  twenty-five  cents. 

Economic  superiority,  especially  if  it  is  earned,  pro- 
vides basis  for  social  standing  in  the  group.  The 
aristocrats  of  this  body  of  workers  are  the  people  who 
have  served  many  years,  earn  regularly  the  production 
bonus  and  quality  bonus,  and  are  able  to  perform  a 
large  number  of  operations.  The  badge  of  superiority 
in  each  instance  is  not  a  blue  ribbon,  or  the  listing  of 
a  name  at  the  head  of  a  typewritten  sheet,  but  cold 
cash.  It  has  its  physical  counterpart  in  clothes,  hats, 
shoes;  a  higher  standard  of  living. 

What  if  these  workers  could  be  made  to  feel  that 
every  day  in  the  service  of  Joseph  &  Feiss  made  more 
certain  provision  for  their  old  age;  if  they  could  be 
convinced  that  long  service  with  the  company,  instead 
of  exploiting  them  of  their  youth  and  strength,  leav- 
ing them  worn  out  and  useless  in  their  old  age,  would 
guarantee  provision  against  want  and  suffering? 

The  "service  bonus"  does  it.  For  each  year  of 
service  the  worker  gets  a  bonus  of  five  cents  per  day, 
up  to  thirty  years  of  service,  beyond  which  time  the 
rate  does  not  increase,  although  the  payment  con- 
tinues. Lizzie  Meyers  has  now  been  with  the  com- 
pany for  four  years,  and  is  getting  a  service  bonus  of 
twenty  cents  per  day,  paid  every  day,  in  addition  to 
the  other  bonuses  she  earns. 

But  this  bonus  is  not  to  be  wasted,  and  the  com- 
pany reserves  the  right  to  deposit  the  bonus,  agreeing 


MEASUREMENT  OF  MOTIVES  43 

to  turn  over  the  bank  book  when  the  employee  leaves 
the  service.  It  is  intended  to  be  educational  towards 
thrift.  In  effect  it  is  similar  to  a  pension  fund,  but 
has  the  advantage  of  being  actually  seen  to  grow  with 
each  pay  period  out  of  the  employees  own  steadfast- 
ness, instead  of  mysteriously  appearing  out  of  the 
company's  benevolence  upon  the  incapacity  or  old  age 
of  the  worker. 

There  is  still  another  bonus.  The  management  is 
not  content  with  having  measured  economic  desire, 
esteem,  desire  for  justice,  security  of  employment, 
power  and  dignity,  pleasantness  of  work,  congeniality 
of  the  group,  merely  for  the  sake  of  greater  production 
and  steadiness  of  service.  It  also  utilizes  these  to  fore- 
stall termination  of  service.  If  the  worker  has  decided 
to  leave  she  can  secure  her  pay  up  to  the  minute  that 
she  quits.  But  if  she  gives  notice  of  her  intention  to 
leave  she  gets  a  bonus  of  a  day's  pay  for  each  week 
of  notice  up  to  six  weeks'  notice.  Six  weeks'  notice 
would  entitle  her  to  an  extra  week's  pay,  when  leaving, 
but  it  would  give  the  firm  that  much  time  to  adjust  its 
organization,  and  to  discover  whether  any  solution 
may  be  found  which  will  make  it  possible  for  the 
worker  to  remain.  It  is  surprising  how  easily  per- 
sonal difficulties  may  be  surmounted  when  an  experi- 
enced person  analyzes  them. 

But  the  very  backbone  of  this  whole  system  of 
measurement  is  the  piece-rate  system — the  system 
which  has  probably  received  as  general  condemnation 
by  organized  labor  as  any  one  method  of  wage  meas- 
urement. Under  it  have  developed  the  evils  of  rate- 
cutting,  speeding-up,  the  tenseness  of  application  which 
so  often  exact  heavy  toll,  physical  and  mental,  of  the 


44  INDUSTRIAL  GOVERNMENT 

worker.  And  here  we  have  the  piece-rate  system  prob- 
ably as  highly  refined  as  it  will  be  found  anywhere  in 
the  country.  There  is  not  merely  a  simple  measure- 
ment of  wages  by  piece  production,  but  additional 
measurement  for  bonus,  quality,  attendance,  length  of 
service,  promptness  and  notice  of  resignation. 

On  the  other  hand  the  evils  that  usually  accompany 
the  piece-rate  system  are  decidedly  mitigated.  The 
low  rate  of  turnover  shows  it.  The  operatives  are 
required  to  work  only  forty-four  hours  a  week,  as 
short  a  period  as  will  be  found  for  regular  day  work 
anywhere.  The  speeding-up  which  becomes  really  seri- 
ous only  for  long  work  periods  is  thus  ameliorated  by 
the  shortness  of  the  working  hours.  If  a  division  com- 
pletes its  task  before  the  day  is  done  the  girls  can 
go  home;  and  many  of  them  finish  before  5  o'clock. 

Systematic  organization  of  their  time,  the  avoidance 
of  delays  in  getting  work  to  the  operatives,  the  occa- 
sional rising  from  a  sitting  posture  to  walking  over 
and  getting  fresh  batches  of  work,  the  manifest  effort 
of  the  management  to  maintain  exact  justice — make  for 
contentment  and  increased  productivity  and  earning 
power. 

They  are  paid  well ;  the  rates  once  made  are  not  cut 
unless  some  mechanical  improvement  or  change  of 
task  justifies  the  cut  and  causes  the  worker  no  loss. 
The  company  provides  a  lunch  room  with  wholesome 
food  at  low  cost,  rest  room,  visiting  nurse,  a  dispen- 
sary. 

But  the  crowning  stroke  in  the  use  of  motive  meas- 
urement and  bonus  incentives  is  the  play  hour.  We 
watched  them  at  play.     The  stout  woman  at  the  end 


MEASUREMENT  OF  MOTIVES  45 

of  the  line  slipped  the  loop  about  her  waist  and  strained 
her  weight  against  the  rope.  Twenty  other  married 
women  in  front  of  her  laid  strong  hands  on  the  ropo 
and  dug  their  feet  into  the  ground,  while  on  the  other 
half  of  the  rope  twenty-one  unmarried  women  strained 
in  the  opposite  direction.  A  signal  from  the  umpire 
and  the  tug-of-war  was  on.  Mixed  in  the  crowd,  hat- 
less  and  coatless  like  the  rest,  cheering  and  laughing 
and  finally  wiping  the  beads  of  perspiration  from  his 
face,  the  manager  of  the  factory  could  scarcely  have 
been  recognized  as  the  same  man  who  had  talked  to 
us  on  his  philosophy  of  management  for  several  hours 
the  day  before. 

Today  it  was  a  tug-of-war,  tomorrow  it  will  be  base- 
ball, day  after  tomorrow  something  else;  but  every  day 
it  is  something,  and  the  management  takes  the  oppor- 
tunity to  achieve  a  common  footing  with  the  rest  of 
the  organization.  Nowhere  else  have  we  found  either 
such  minute  measurement  of  motives  in  terms  of  pe- 
cuniary incentive,  or  such  careful  attention  toward 
preventing  any  ill-effects  that  are  often  charged  against 
it.  The  management  is  thoroughly  convinced  that  mo- 
tive measurement  and  bonus  incentive,  as  applied  in 
their  organization,  has  the  opposite  of  ill-effects.  We 
figure  the  reason  to  be,  that  they  do  not  leave  it  to 
operate  itself  like  a  machine  once  wound  up  and  let 
go,  but  the  whole  management  is  always  on  the  job 
attending  every  minute  to  the  wear  and  tear  of  the 
system,  and  improving  it  at  any  point  as  soon  as  a 
defect  appears.  Little  points  which  we  found  in 
August  were  not  there  the  following  March.  Improve- 
ments made  in  March,   1920,  were  just  beginning  to 


46  INDUSTRIAL  GOVERNMENT 

be  thought  of  the  preceding  August,  Even  yet,  they 
tell  us,  much  remains  to  be  done.  Theirs  is,  indeed, 
the  greatest  experimental  laboratory  of  industrial  psy- 
chology that  we  have  found  in  America. 


V 

HEALTH  AND  HAPPINESS 

The  Filene  store  in  Boston  has  always  been  recog- 
nized as  a  great  experiment  station  in  industrial 
government.  The  machinery  here  is  of  an  amazing 
variety.  Long  before  industrial  democracy  became  a 
fetish,  Filene's  had  all  the  forms  which  fertile  brains 
have  been  thinking  out  in  the  last  year  or  two  under 
that  name.  The  representative  lawmaking  body  of  em- 
ployees, the  paid  executive  "business  agent"  elected  by 
the  employees,  the  Board  of  Arbitration,  even  the  em- 
ployee members  of  the  Board  of  Directors — Filene's 
have  them  all  and  more.  They  had  worked  it  all  out 
gradually  before  most  places  had  thought  about  start- 
ing. 

Mary  Smith  thinks  that  she  would  like  to  work  at 
Filene's.  She  has  heard  that  it  is  a  mighty  good  place. 
Inexperienced  girls  start  to  work  there  for  a  minimum 
wage  of  $9  a  week,  but  with  the  commissions  they  say 
that  beginners — sales  girls — seldom  make  less  than  $i6 
or  $i8.  Experienced  sales  people  are  paid  a  minimum 
of  $15  to  start — in  addition  to  commissions.  The 
girls  who  start  at  $9  (and  they  are  very  few  nowadays, 
as  most  of  them  begin  at  $10  or  $12)  are  assured  of 
an  automatic  increase  up  to  $15  within  two  years. 

Then  they  say  that  they  are  always  treated  well  at 
Filene's.     You  can't  be  imposed  on  by  a  customer  or 

47 


48  INDUSTRIAL  GOVERNMENT 

somebody  above  you.  If  a  customer  accuses  you  of 
short  changing  and  you  know  you  didn't,  you  can  take 
your  case  to  the  Board  of  Arbitration  and  you  are  sure 
of  a  fair  hearing,  and  sure  to  get  justice.  The  depart- 
ment heads  are  pretty  decent.  They  have  to  be  or  you 
will  complain  to  the  Board  of  Arbitration.  The  board 
is  elected  solely  by  the  employees  and  is  very  likely,  if 
it  has  had  a  lot  of  trouble  from  the  department  headed 
by  any  particular  person,  to  tell  the  company  they  had 
better  remove  that  person  and  put  in  someone  else 
whom  the  girls  will  stand  for. 

These  are  only  a  few  of  the  reasons  why  Mary  Smith 
— and  there  are  thousands  of  Mary  Smiths  in  Greater 
Boston — wants  to  work  at  Filene's.  The  girls  say  they 
have  awfully  good  times  there.  They  have  parties  and 
plays  and  picnics  and  concerts.  The  three  thousand 
employees  run  their  own  cafeteria  at  cost,  and  they  have 
their  own  club  rooms.  If  you  are  ambitious  there  is  a 
good  chance,  too.  The  employees'  own  organization — 
The  Filene  Cooperative  Association  (F.  C.  A.  for 
short) — maintains  a  lot  of  classes — courses  for  general 
culture  and  courses  for  improvement  in  business  abil- 
ity. According  to  the  plan  of  the  F.  C.  A.,  you  are 
supposed  to  go  with  your  group  and  listen  to  lectures 
from  members  of  the  store  force  who  know  all  about 
different  branches  of  the  business.  On  Monday  morn- 
ing, or  Tuesday  morning,  or  some  time  when  the  store 
is  not  very  busy,  one  of  the  teachers  whom  the  store 
employs  comes  into  your  department  and  talks  over 
with  the  whole  sales  force  the  problems  that  bother 
you  and  the  best  methods  of  building  up  sales,  increas- 
ing the  business  or  selecting  goods. 

If  you  like  politics,  they  say  you  can  get  all  you  want 


HEALTH  AND  HAPPINESS  49 

here.  Great  is  the  excitement  when  the  campaign  is  on 
for  election  of  the  president  and  council  of  the  F.  C.  A. 
and  for  the  Board  of  Arbitration.  You  come  down 
early  before  opening  time  and  stay  after  closing  time. 
The  candidates  and  their  lieutenants  hold  executive 
meetings  around  the  store.  The  speakers  are  eloquent. 
So  are  the  candy  and  cigars  bought  from  a  generous 
campaign  fund. 

Mary  Smith  does  not  care  particularly  about  politics, 
but  the  whole  thing  sounds  pretty  good — the  fun,  and 
everybody  good-natured — and  all.  So  she  applies  at 
the  employment  office  and  gets  a  job. 

Now  she  has  become  a  part  of  the  employees*  or- 
ganization— the  F.  C.  A. — the  "company  union"  as 
critics   might   call  it. 

Just  how  much  of  a  union  is  it?  What  does  it 
amount  to  anyway?  Well,  that  depends  on  Mary 
Smith — and  all  the  other  Mary  Smiths  in  the  store. 
There  are  a  great  many  of  them — girls  to  whom 
Filene's  looks  good.  There  are  almost  too  many  of 
them,  in  fact,  for  the  effective  working  of  this  same 
machinery  of  freedom  from  autocratic  control  and 
supervision.  For  after  one  Mary  Smith  and  all  the 
other  Mary  Smiths  get  in,  there  is  just  as  much  democ- 
racy at  Filene's  as  they  themselves  make — just  as  much 
freedom  from  autocratic  control  as  they  are  willing 
and  able  to  assert. 

No,  that  is  not  true.  We  must  not  forget  the  Board 
of  Managers  whose  democracy  has  invited  that  of  the 
employees.  Otherwise  there  would  be  no  F,  C.  A.,  no 
legislative  body,  no  Board  of  Arbitration,  no  employee 
members  of  the  Board  of  Directors.  These  do  not  ex- 
ist because  Mary  Smith  and  her   friends  asked   for 


50  INDUSTRIAL  GOVERNMENT 

them,  but  because  the  Filenes  had  an  idea  that  Mary 
Smith  and  Jane  Sullivan  and  Bill  Johnson  and  all  the 
others  ought  to  want  them  and  would  be  democratic  if 
they  only  knew  what  fun  it  was. 

How  about  it?  What  good  are  they  getting  from 
their  machinery  of  "democracy"  ? 

Take  the  organization — the  Filene  Cooperative  Asso- 
ciation. To  begin  with,  they  manage  all  their  own 
"welfare  work,"  a  savings  bank  with  a  loan  depart- 
ment ;  a  health  and  accident  insurance  plan ;  a  coopera- 
tive store  through  which  they  can  buy  food,  meat,  and 
other  articles;  a  lunch  room  of  their  own  which  serves 
three  meals  a  day  and  caters  for  their  parties  and 
dances ;  a  clinic ;  a  choral  club ;  a  musical  comedy  once 
each  year;  a  department  of  athletics,  and  a  newspaper. 
Everything  but  the  clinic  is  supposed  to  be  self-support- 
ing. If  anything  fails  to  be,  they  go  into  the  pockets 
of  the  company. 

These  activities  are  supervised  by  committees  of  the 
council  and  administered  by  the  executive  secretary  of 
the  F.  C.  A.,  who  is  paid  by  the  store,  but  appointed 
by  the  president  of  the  F.  C.  A.  and  confirmed  by 
five-sixths  of  the  council.  Making  the  company  foot 
the  bill  seems  to  be  a  favorite  pastime  of  the  F.  C.  A. 
They  even  went  so  far  one  time  as  to  employ  an  expert 
to  go  over  the  books  of  the  company  to  check  up  cer- 
tain facts  which  they  wanted  in  connection  with  a 
profit-sharing  plan,  and  presented  the  bill  to  the  com- 
pany. 

The  legislative  body  for  the  employees  is  the  council, 
which  consists  of  twenty-four  members,  one  member 
elected  from  each  of  the  twelve  sections  of  the  store; 
the  presidents  of  the  Men's,  Women's  and  Girls'  clubs, 


HEALTH  AND  HAPPINESS  51 

members  ex-officio,  and  the  president,  vice-president, 
secretary  and  treasurer. 

Through  the  council,  the  F.  C.  A,  exerts  power  to 
make  the  rules  that  affect  the  discipline  or  working 
conditions  of  the  employees  of  the  store.  Through  the 
council  the  employees  make  wage  agreements  with  the 
company,  and  carry  on,  by  means  of  committees,  the 
social  and  other  activities  of  the  employees. 

The  Board  of  Arbitration  is  the  strangest  thing  in 
the  whole  category  of  strange  things  at  Filene's.  A 
board  of  twelve  members  consisting  entirely  of  em- 
ployees, elected  one  from  each  section  of  the  store,  with 
a  chairman  appointed  from  the  council  by  the  presi- 
dent of  the  F.  C.  A. ;  it  passes  on  all  appeals  affecting 
differences  between  the  firm  or  the  management  and 
the  employees — questions  of  dismissal,  wages,  position 
in  the  store,  missing  sales,  short  change,  lost  packages 
and  damages  to  goods.  The  decision  of  the  board  is 
final. 

The  firm  can  hire  Mary  Smith,  but  if  it  keeps  her 
two  weeks  it  cannot  fire  her  without  a  possible  "come 
back."  She  has  a  right  of  appeal  to  the  Board  of  Arbi- 
tration and  if  the  majority  of  these  twelve  employees 
say  that  the  firm  has  shown  no  good  reason  for  firing 
her,  she  cannot  be  dismissed.  On  the  other  hand,  the 
Board  may  carry  its  decision  further  than  simply  de- 
claring that  Mary  Smith  is  to  be  retained.  It  may  de- 
cide that  the  trouble  was  not  due  to  the  fault  of  Mary 
Smith,  but  of  someone  higher  up.  It  may  even  go  so 
far  as  to  recommend  that  the  firm  dismiss  the  depart- 
ment head.  This  sometimes  happens  when  a  lot  of 
complaints  from  various  persons  in  the  same  depart- 


52  INDUSTRIAL  GOVERNMENT 

ment  lead  to  the  suspicion  that  the  trouble  is  not  with 
Mary  Smith. 

It  is  the  Arbitration  Board,  in  fact,  which  is  the  real 
efficiency  committee  for  the  firm.  It  is  the  body  which 
discovers  the  weak  spots  and  the  sore  spots  in  the 
store.  It  is  the  body  which  is  the  closest  to  the  em- 
ployees, the  most  cherished  by  them  and  the  most  popu- 
lar for  aspiring  candidates  at  election  time.  Election 
to  this  board  is  considered  a  great  honor.  The  fortu- 
nate ones  who  are  elected  take  their  work  very  seri- 
ously. They  realize  that  they  are  making  decisions 
momentous  to  the  persons  involved  and  to  be  followed 
as  precedents  for  the  future. 

If  the  Board  of  Arbitration  is  unique,  yet,  in  one 
other  venture  Filene's  takes  first  prize.  So  far  as  we 
are  able  to  find  out,  it  was  the  first  firm  in  the  United 
States  to  admit  non-stockholding  employees,  elected 
by  the  employees,  to  membership  in  the  Board  of  Di- 
rectors ;  and  one  of  only  three  firms  in  the  country  at 
this  writing.  Four  out  of  the  eleven  members  are  thus 
chosen,  and  two  more  employee  members  are  chosen 
by  the  firm. 

Filene's  is  a  gold  mine  for  A,  who  wants  arguments 
in  favor  of  this  plan,  so  much  debated  today,  provided 
for  in  the  law  of  Massachusetts,  and  proposed  by  at 
least  one  other  state  legislature.  It  is  just  as  much  of 
a  "find"  for  B,  who  wants  arguments  against  the  sys- 
tem of  employee  representation  on  the  Board  of  Di- 
rectors. 

B,  for  example,  studies  the  present  employee  mem- 
bership of  the  Board  of  Directors  and  tells  you  that 
it  is  very  evident  that  the  employees  take  little  inter- 
est in  it.    Not  a  single  employee  representative  is  a  real 


HEALTH  AND  HAPPINESS  53 

salesman  on  the  floor.  They  are  all  taken  from  the 
"higher-ups" ;  two  merchandise  managers,  a  division 
manager  and  the  paid  executive  secretary  of  the  F.  C. 
A.  "You  see,"  says  B,  "give  them  a  chance  and  they 
don't  make  the  most  of  it.  They  don't  trust  each  other 
and  they  have  to  turn,  after  all,  to  the  high  executives 
when  it  comes  to  managing  the  business." 

"Why,"  says  A,  "what's  the  matter  with  you?  Here 
you  have  the  best  argument  in  the  world  in  favor  of 
allowing  the  employees  to  select  some  of  the  members. 
This  simply  shows  their  good  judgment.  The  point  is 
that  the  people  whom  they  do  select  are  responsible  to 
them  and  must  come  back  to  them  for  reelection,  and 
if  the  voters  don't  like  their  representatives  they  simply 
won't  vote  for  them  again.  If  the  store  force  wants 
information  and  their  representatives  don't  give  it  to 
them,  it  is  up  to  them  to  put  in  representatives  who  will 
do  what  they  want." 

"But,"  says  B,  "look  at  the  difference  between  the 
way  they  act  about  the  director  business  and  the  eager- 
ness with  which  they  scramble  for  seats  on  the  Board 
of  Arbitration.  There  they  have  four  salesgirls,  one 
salesman,  one  merchandise  man,  one  buyer,  the  head 
of  the  telephone  girls,  a  girl  member  of  the  educational 
force  of  the  store,  a  minor  executive  and  a  store  detec- 
tive. There  is  where  their  heart  is — in  the  Board  of 
Arbitration,  not  in  the  Board  of  Directors.  The  em- 
ployees don't  want  to  run  the  business." 

"On  the  other  hand,"  says  A,  "the  firm  considers  this 
Board  of  Arbitration  a  real  efficiency  board.  It  is  here 
that  you  get  a  lot  of  the  skeletons  in  the  closet — the 
secrets  that  the  firm  and  the  Board  of  Directors  can't 
get  at.    They  have  to  depend  on  the  Arbitration  Board 


54  INDUSTRIAL  GOVERNMENT 

to  give  them  information  and  advice  about  the  weak 
spots  in  the  store  management,  and  after  they've  had 
a  little  taste  of  it,  these  board  members  who  engaged  in 
such  a  scramble  for  office,  become  pretty  well  sobered. 
They  begin  to  feel  a  heavy  weight  on  them  and  to  move 
as  cautiously  as  if  they  really  were  on  the  Board  of 
Directors." 

Let  it  go  at  that.  Anyhow,  Filene's  have  the  two 
big  things  that  are  advocated  these  days  for  labor  par- 
ticipation in  management.  They  have  the  so-called 
Arbitration  Board,  which  is  miscalled,  for  there  is  no 
representative  of  the  employers  on  the  board  and  no 
provision  for  calling  in  a  disinterested  party  to  arbi- 
trate. It  is  elected  solely  by  the  employees  and  is  the 
final  authority  in  the  store  on  every  question  affecting 
any  or  all  employees.  It  is  more  than  collective  bar- 
gaining, or  collective  government,  it  is  a  Supreme 
Court  of  Employees.  And,  in  addition,  employees 
have  four  of  the  nine  members  of  the  Board  of  Di- 
rectors. 

How  are  Filene's  going  to  be  rated  when  the  roll  of 
industrial  government  is  called?  Have  we  here  simply 
a  "company  union"  founded  by  enthusiastic  employers 
and  tolerated  by  indifferent  employees?  Is  the  whole 
thing  a  trick  to  get  more  and  better  work  out  of  the 
employees,  or  does  it  flow  from  a  real  desire  to  hasten 
self-government  in  industry?  Is  there  any  real  democ- 
racy here?  If  you  should  take  away  the  two  Filenes 
and  the  other  managers,  could  the  employees  keep  the 
business  going  as  it  ought  to  go  ? 

That  is  asking  a  good  deal.  You  must  remember 
that  this  is  a  big  specialty  store.  A  large  percentage 
of  the  employees  are  women — girls  who  are  young  and 


HEALTH  AND  HAPPINESS  55 

love  to  dance  and  play  and  look  for  husbands,  and 
women  who  no  longer  dance  and  play  and  whose  first 
and  last  thought  is  to  keep  the  job,  in  order  that  they 
may  care  for  those  who  are  dependent  on  them;  all  of 
them  women  who  long  for  the  beautiful  things  which 
they  pass  daily  across  the  counter  to  those  who  can 
afford  to  buy  them.  It  is  no  easy  or  brief  task  to  stir 
the  ambition  of  these  women  to  the  point  where  they 
thrill  at  the  thought  of  sharing  in  the  management  of 
a  great  business. 

Anyhow,  do  they  need  democracy  and  self-govern- 
ment when  they  have  such  democratic  management? 
Efficiency  here  is  evidently  a  by-product  of  health  and 
happiness.  But  even  though  democracy  here  started 
from  above,  is  not  the  democratic  attitude  of  manage- 
ment a  reflection  of  the  democracy  of  the  whole  store? 
Although  the  Board  of  Arbitration  has  actually  at 
times  reinstated  employees  whose  dismissal  has  been 
approved  by  the  management,  the  management  say  now 
that  the  Board  was  right,  and  it  was  a  good  thing  for 
them,  as  individuals,  to  be  overruled  by  the  employees 
collectively.  They  had  made  a  mistake,  and  they  were 
protected  in  the  store  against  their  own  mistakes. 
Surely  it  would  seem  that  almost  any  manager  would 
cultivate  and  acquire  a  winning  personality  toward  em- 
ployees if  they  had  a  veto  on  him  like  that. 

Further  light,  perhaps,  may  be  thrown  upon  some 
of  these  questions  by  the  attitude  of  some  of  the  lead- 
ers in  a  matter  which  has  received  a  great  deal  of 
attention  of  late,  namely,  the  question  of  affiliation 
with  national  labor  organizations.  Several  depart- 
ments in  the  concern,  including  the  factory,  are  already 
affiliated   with   national  labor   unions.      The   Filenes 


56  INDUSTRIAL  GOVERNMENT 

recognize  these  unions  and  make  agreements  with  them. 
The  company  is  apparently  taking  no  stand  on  the 
question  whether  the  F,  C.  A.  shall  join  the  Federation 
of  Labor.  It  leaves  the  employees  to  settle  it  among 
themselves.  Discussions  are  heated.  The  heat  is  not 
spent,  however,  upon  the  spirit  and  object  of  national 
unions,  with  which  Filene  employees  seem  to  be  in 
entire  sympathy.  The  agreement  against  affiliation  is 
entirely  a  local  one;  namely,  that  with  their  F.  C.  A. 
they  can  obtain  more  than  they  can  obtain  through 
any  other  union ;  that  the  F.  C.  A.  is  really  in  advance 
of  any  union.  Affiliated  with  an  outside  union,  they 
would  be  held  down  to  its  level,  which  is  a  lower  level 
than  the  one  which  they  have  achieved.  The  problem 
as  seen  by  the  Filene  employee  is  to  wake  up  and  use 
the  power  he  has  and  not  trade  it  off  before  he  has  dis- 
covered its  value  and  learn  to  make  the  most  of  it. 

If  you  study  all  the  machinery  of  organization  on 
paper,  you  may  get  the  idea  that  here  is  Industrial 
Democracy  personified.  If  you  look  only  at  the  record 
of  social  activities,  you  may  conclude  that  here  is  sim- 
ply another  "company  union"  made  up  of  employees 
who  are  indifferent  to  their  own  real  interests.  You 
see  a  scattering  of  energy,  a  great  deal  of  activity  spent 
upon  having  a  good  time  which  you  might  think  could 
be  spent  to  greater  advantage  upon  the  vital  problems 
of  greater  efficiency  in  sales  and  fairer  distribution. 
But  you  see,  also,  if  you  make  a  fair  analysis  of  the 
place,  that  in  spite  of  distractions,  there  is  here  much 
greater  attention  given  to  these  fundamental  problems 
than  in  other  places  where  the  pursuit  of  happiness 
seems  to  be  lacking.  It  seems  logical  that  if  they  were 
a  little  less  gay,  they  might  accomplish  more  to  their 


HEALTH  AND  HAPPINESS  57 

own  interest.  The  only  trouble  with  the  idea  is,  that 
in  other  places  where  they  are  less  gay,  they  do  not 
seem  to  have  accomplished  as  much!  Whatever  else 
one  may  say  of  the  men  and  women  at  Filene's,  they 
are  a  lively  group  and  they  at  least  have  leaders  who 
are  far  more  alive  to  their  own  interests  than  are  the 
average  sales  people.  Of  the  employers  it  is  pretty 
safe  to  say  that  while  health  and  happiness  of  the  em- 
ployees is  with  them  a  great  object,  they  are  intensely 
interested  in  the  development  of  self-government  in  the 
store. 


VI 

GOVERNMENT  BY  IMAGINATION 

Dennison  for  the  Dennisons!  Not  the  Dennison 
Family,  but  the  Dennison  Workers.  Every  stock- 
holder, every  director,  every  officer  of  the  Dennison 
Manufacturing  Company,  Framingham,  Mass.,  is  an 
actual,  active  employee  of  the  company.  There  are 
other  stockholders — preferred  stockholders — but  they 
have  no  voting  power. 

Seventy-five  years  ago  the  great-grandfather  of  the 
Dennison  family  began  to  make  paper  boxes  in  his 
kitchen.  A  knife,  a  scissors,  a  pot  of  paste,  a  slab  of 
wood,  were  his  factory. 

His  jewelry  boxes  were  in  great  demand.  He  added 
other  paper  products.  Today  the  company  manufac- 
tures 10,000  separate  articles,  sends  its  products  to  all 
parts  of  the  country  and  many  parts  of  the  world,  sells 
millions  of  tags  and  baggage  checks  to  large  railway 
companies,  millions  of  Christmas  cards  to  small  re- 
tailers. 

A  splendid  organization,  several  valuable  patents,  a 
few  monopolies,  big  dividends,  the  period  of  risk  and 
development  has  passed  and  the  company  is  as  safe  as 
any  industrial  investment  may  be. 

But  prosperity  brought  its  perils.  There  were  cer- 
tain stockholders  who  saw  the  Dennison  industry 
merely  as  a  means  to  an  end,  the  end  being  profits  and 

58 


GOVERNMENT  BY  IMAGINATION       59 

then  some  more  profits,  with  the  absentee  owners  in  the 
saddle  in  unchallenged  enjoyment  of  money  and  power. 

The  president  of  the  company,  himself  a  Dennison, 
saw  another  vision.  He  saw  the  Dennison  equipment 
and  the  Dennison  workers  as  something  more  than  en- 
gines for  turning  out  more  profits.  He  saw  them  also 
as  instruments  for  manufacturing  paper  boxes  and  tags, 
and  paper  napkins  and  10,000  like  articles,  and  sell 
them  to  railroads  and  people  who  use  them  up  in  mak- 
ing the  world  richer.  He  determined  that  while  he  had 
control  he  would  fix  it  up  so  that  those  who  looked  at 
the  industry  in  his  own  broad-minded  fashion  should 
always  keep  control.  And  that  is  how  there  came  to  be 
government  by  imagination. 

Who  is  it  that  creates  the  profits  of  the  Dennison 
Manufacturing  Company?  It  certainly  is  not  the  ab- 
sentee stockholders.  The  original  Dennison  evidently 
had  a  creative  imagination.  His  imagination  was  used 
in  making  boxes  that  nobody  ever  thought  of  before, 
and  creating  markets  that  nobody  ever  imagined  could 
be  created. 

Who,  then,  are  the  real  descendants  of  the  original 
Dennison?  Shall  we  say  they  are  the  workers?  The 
original  Dennison  was  a  worker.  But  it  was  not  his 
work  that  built  up  this  magnificent  business — this  going 
concern  that  lives  on  fifty  years  after  he  died.  It  was 
his  creative  imagination.  He  hired  the  workers  and 
they  did  what  he  told  them  to  do,  after  his  imagination 
had  told  him  what  to  do  and  how  to  do  it. 

The  real  descendants  of  the  original  Dennison  are 
those  of  the  3,000  workers  who  work  primarily  with 
creative  imagination.  It  is  by  imagination  that  the 
Dennison  Company  has  developed  10,000  separate  ar- 


6o  INDUSTRIAL  GOVERNMENT 

tides,  and  it  will  be  imagination  that  will  make  and  sell 
the  innumerable  new  articles  and  the  better  old  ones 
that  it  must  make  and  sell  if  the  concern  is  to  keep  go- 
ing another  seventy-five  years. 

If  not  all  of  these  three  thousand  work  with  imagi- 
nation how  shall  we  discover  those  who  do  ?  Shall  we 
appoint  a  committee  and  give  it  power  to  pick  and 
choose  ?  No,  that  will  leave  too  much  room  for  favorit- 
ism.   Favoritism  will  discourage  imagination. 

An  automatic  method  of  choosing  was  first  sought 
by  means  of  the  pay  envelope  and  the  length  of  service 
record.  Men  who  stick  and  rise  would  seem  to  have 
imagination.  So  $1,200  a  year  and  seven  years'  service 
were  hit  upon  as  the  boundary  line  where  imagination 
crosses  over.  Then  came  the  war  and  the  unstable 
dollar,  and  a  change  seemed  desirable.  Of  the  change 
finally  adopted,  a  company  booklet  says : 

Eventually  the  tremendous  changes  in  the  value  of  the 
dollar,  and  more  especially  the  irregular  application  of 
these  changes  among  various  classes  of  employees,  en- 
tirely destroyed  the  salary  line  as  a  true  dividing  line  be- 
tween those  of  the  employees  w^hose  effects  upon  profits  were 
important  and  appreciable  and  those  whose  effects  upon  our 
net  profits  account  were  remote  and  heavily  conditioned  by 
the  policies  of  the  management.  Principal  employees  are 
now  limited  to  those  who  have  had  five  years  or  more  of 
service  and  whose  position  with  the  company  requires  the 
exercise  of  managing  ability  and  control  over  methods  of 
manufacturing  and  marketing,  such  as  any  executive,  de- 
partment head,  principal  foreman,  chief  clerk,  branch  man- 
ager, or  principal  salesman;  or  whose  work  shows  the  use 
of  a  high  degree  of  imagination,  tact  or  business  judgment 
— those  qualities  upon  which  we  believe  the  constant  earn- 
ing of  profits  to  depend.  To  the  directors  is  left  the  applica- 
tion of  this  rule,  but  the  industrial  partnership  stockholders 


GOVERNMENT  BY  IMAGINATION       6i 

may    from   year   to   year   pass    votes    further   defining   the 
directors'  methods  of  choosing. 

In  19 1 3  there  were  167  principal  employees.  In 
19 1 9  the  number  had  risen  to  320,  about  one-ninth  of 
the  total  force.  One-ninth  are  employees  with  creative 
imagination.  They  are  the  real  industrial  descendants 
of  the  great-grandfather  of  the  Dennisons.  It  is  they 
who  "produce"  the  profits,  and  keep  the  concern  going. 
The  other  eight-ninths  produce  wages. 

Profits  are  in  the  future.  It  requires  imagination  to 
see  them.  Wages  are  paid  every  week  in  cash.  These 
are  paid  for  jobs  which  need  but  little  imagination. 
Many  of  the  employees  are  girls  whose  industrial  life 
is  soon  over — two  or  three  years  in  the  factory  after 
schooling  time  is  past,  in  which  to  put  by  something 
for  family  or  for  self.  Their  imagination  is  more 
bound  up  with  anticipations  of  romance  than  devoted  to 
solving  the  perplexities  of  production. 

For  them,  and  all  the  others  whom  it  has  been 
thought  advisable  to  keep  on  the  other  side  of  the  in- 
dustrial partnership  line,  weekly  wages  are  deemed 
the  accurate  measure  of  their  value  to  the  company. 
They  are  paid  mostly  by  the  piece.  Their  performance 
can  be  seen  and  measured  as  they  go  along.  Theirs  is 
not  the  field  of  the  creative  imagination,  of  profit  crea- 
tion, nor  should  theirs  be  the  reward. 

Having  discovered  the  one-ninth  whose  imagination 
creates  the  unseen  profits,  how  shall  they  be  put  in 
control  of  the  profits  which  they  expect  to  create? 

The  absentees  own  the  property.  The  absentees  sim- 
ply must  be  bought  off.  How  much  will  they  take  to 
get  out  and  in  what  currency  will  they  accept  payment? 


62  INDUSTRIAL  GOVERNMENT 

A  simple  matter,  once  it  has  been  done.  But  it  was  a 
big  imagination  that  conceived  it  and  did  it. 

Induce  the  absentees  to  turn  over  their  common  stock 
with  voting  power  to  the  imaginative  workers  and  ac- 
cept preferred  stock  without  voting  power.  Clever 
enough.  But  the  imaginative  workers  had  to  pay. 
They  paid  $4,500,000  in  preferred  stock  at  8  per  cent 
— a  permanent  charge  on  the  business  of  $360,000  a 
year,  where  the  dividends  on  the  common  stock  had 
been  running  something  like  $200,000  to  $250,000. 

The  preferred  stock  is  doubly  secure.  If  the  workers 
fail  to  pay  that  full  $360,000  a  year  for  a  period  of 
four  years,  then  the  preferred  stock  automatically  gets 
back  its  voting  power  and  the  absentee  owners  step 
into  control.  The  preferred  stockholders  are  virtually 
bondholders  but  are  saved  the  trouble  of  legal  fore- 
closure if  interest  is  defaulted. 

Now  about  the  common  stock.  They  call  it  "indus- 
trial partnership  stock."  Where  does  it  come  from? 
By  March,  19 13,  15,122  shares  had  been  issued  to  the 
167  principal  employees.  The  issue  amounted  to  about 
one-third  of  the  total  salary-roll  of  the  principal  em- 
ployees. Thirty-three  and  one-third  per  cent  profit  for 
imagination ! 

But  it  was  not  cash,  of  course.  It  was  just  that 
amount  of  profits  put  back  into  the  machinery  and 
buildings  and  business.  In  1919,  thirty  thousand  shares 
of  industrial  partnership  stock  were  issued — 45  per 
cent  of  the  payroll  of  320  principal  employees — all  of 
it  going  back  into  the  business.  A  good  depreciation 
account  and  several  reserve  funds  have  been  built  up 
for  lean  years  and  emergencies. 


GOVERNMENT  BY  IMAGINATION       63 

Besides,  the  industrial  partnership  stock  has  been 
getting  dividends  in  cash — as  high  as  15  per  cent  In 
19 19.  This  dividend  must  always  amount  to  at  least 
five  per  cent  in  cash  before  any  additional  stock  can 
be  issued. 

Finally,  another  clever  thing — in  fact  the  heart  of 
the  whole  thing — an  industrial  partner  cannot  sell,  or 
give  away,  or  bequeath,  or  even  take  away  his  indus- 
trial partnership  stock,  for  every  share  of  it  is  a  reward 
for  the  continual  exercise  of  creative  imagination  on 
the  job  in  the  interest  of  an  ever-expanding  and  im- 
proving Dennlson  industry.  Not  the  investment  it 
represents  but  its  conferring  of  power  on  one  who  has 
been  selected  to  help  keep  alight  the  Dennison  imagina- 
tion, this  is  the  real  significance  of  a  share  of  Industrial 
partnership  stock. 

If  an  individual  partner  severs  his  connections  with 
the  concern  the  reward  for  the  use  of  imagination  in 
the  past  is,  of  course,  made  secure.  The  company  may 
pay  immediately  for  his  stock  either  at  par  or  cash  or 
by  the  Issuance  of  a  second  preferred  stock  of  equal 
face  value  which  can  be  sold,  given  away,  bequeathed, 
and  taken  away,  but  which  has  no  voting  power.  On 
some  other  Dennison  worker  will  descend  in  time  the 
mantle  of  power  as  a  reward  for  imagination,  which 
this  new  absorbed  Industrial  partnership  stock  used 
to  hold. 

That  Is  the  reason  why  every  member  of  the  board 
of  directors  is  a  worker. 

The  president  of  the  board  is  president  of  the  com- 
pany. The  vice-president  exercises  general  supervision 
over  the  retail  stores.     The  treasurer  watches  over 


64 


INDUSTRIAL  GOVERNMENT 


manufacturing,  warehousing,  and  shipping.  The  other 
members  of  the  board  are  in  charge,  respectively,  of 
foreign  sales,  purchasing  and  merchandizing,  and  sell- 
ing personnel. 

Not  even  a  banker,  or  financier,  or  dummy  director, 
or  absentee  of  any  kind  on  the  board!  All  of  them 
workers  with  the  Dennison  imagination! 

What  does  it  mean  for  the  320  industrial  partners  ? 
Take  an  illustration:  Suppose  John  Doe  is  head  of  a 
department  with  $4,000  salary.  Here  is  what  it  would 
have  meant  for  him  during  the  past  three  years,  even 
though  his  salary  had  not  been  increased : 


Total  Stk. 

I.  P.  Stock  Issued                held 

Year 

Salary 

%  of  Salary 

Amt.           before 

1916 

$4,000 

25% 

$1,000             

1917 

4,000 

75% 

3,000            $1,000 

1918 

4,000 

30% 

1,333              4,000 

1919 

4,000 

45% 

Dividends 

on  previously 
held   stock 

1,800              5,333 

Total 
Income 

1916 

none 

$4,000 

1917 

(10%)  $100 

4,100 

1918 

(10%)     400 

4,400 

1919 

(15%)     800 

4,800 

Suppose  he  were  to  remain  in  the  service  of  the  com- 
pany for  another  ten  years  even  without  an  increase  in 
salary,  and  that  each  year  the  stock  dividend  should 
amount  to  only  25  per  cent  of  his  salary,  which  is  the 
smallest  issue  to  date,  and  that  the  dividends  on  already 
issued  stock  would  amount  to  only  10  per  cent,  the  situ- 
ation of  John  Doe  in  1929  would  be  like  this: 


GOVERNMENT  BY  IMAGINATION       65 


Total  I.  P. 

I.  P.  Stock 

Issued 

Stock  Earn- 

Salary 

%  of  salary 

Amount 

ing  Dividends 

$4,000 

25% 

$1,000 

$16,133 

Dividends 

Total 

1 

on  stock 

Income 

(10%)  $1,613 

$5,61 

3 

At  the  end  of  seven  more  years,  a  total  service  of  not 
more  than  twenty-seven  years,  John  Doe  would  hold 
industrial  partnership  stock  to  the  amount  of  $23,133. 
Should  he  at  that  time  decide  to  leave  the  employ  of 
the  company  his  income  on  the  second  preferred  stock 
taken  in  exchange  would  amount  to  something  over 
$1,600  per  year.  Thus,  even  though  he  had  saved  not 
a  penny  of  his  salary  or  dividends  in  all  his  years  of 
service,  John  Doe  would  be  assured  an  income  on  which 
to  retire. 

Surely  this  looks  promising  for  the  workers  with 
imagination!  No  absentee  can  ever  get  control  if  they 
continue  to  make  the  profits.  The  control  is  secure 
against  the  speculation  of  the  manipulator,  the  finan- 
cier. 

But  how  about  the  2,700  wage  workers?  Is  it  not 
just  as  bad  to  be  governed  by  industrial  imagination  in 
the  shop  as  by  financial  imagination  on  Wall  Street? 
Is  it  quite  fair,  after  all,  or  even  wise,  to  reward  imagi- 
nation for  creative  plans,  and  offer  no  incentive  for 
extra  effort,  elimination  of  waste  and  for  cooperation 
on  the  part  of  ordinary  wage  workers? 

The  Dennison  management  faced  this  question 
frankly.    The  answer  is  two-fold. 

The  Dennison  Company  has  been  an  outstanding 
pioneer  in  regularizing  employment.      In    19 19  they 


66  INDUSTRIAL  GOVERNMENT 

had  set  aside  $100,000  as  a  starter  for  "unemployment 
insurance,"  thereby  making  an  important  beginning  in 
the  direction  of  making  the  Dennison  workers'  future 
secure. 

The  management  recognized  that  we  Hve  for  the 
present  as  well  as  the  future,  that  we  like  to  see  the 
ounces  of  energy  which  we  are  expending  transform 
themselves  visibly  into  a  reward  which  makes  possible 
a  higher  standard  of  comfort.  So  they  asked  the  2,700 
workers  to  propose  something.  The  2,700  appointed 
a  committee  of  sixty.  This  committee  formulated  a 
plan.  They  submitted  this  plan  to  the  management. 
Details  were  worked  out  and  the  following  scheme  de- 
termined. 

Hereafter,  instead  of  all  the  net  profits  above  what 
are  necessary  to  satisfy  the  First  Preferred  Stock,  go- 
ing to  the  Principal  Employees,  they  are  to  be  divided. 
One-third  of  the  total  fund  to  be  distributed  is  set 
aside  as  the  Employees'  Industrial  Partnership  fund; 
the  remaining  two-thirds  goes  to  the  Principal  Em- 
ployees. 

Every  employee,  other  than  a  principal  employee, 
actually  employed  in  the  plant,  who  has  had  at  least 
two  years'  continuous  service  prior  to  January  i  of 
any  year  in  which  profits  are  shared  shall  participate. 
Resignation  or  discharge  from  the  company  terminates 
all  rights  as  an  Employee  Industrial  Partner.  The 
worker  may  be  reinstated  upon  re-entering  the  service 
of  the  company,  but  loses  credit  for  the  years  of  service 
prior  to  his  separation. 

The  basis  of  distribution  is  simple.  It  recognizes 
no  differences  in  kind  of  service,  department  or  rank, 


GOVERNMENT  BY  IMAGINATION       67 

other  than  the  differences  already  reflected  in  regular 
wages.  The  workers  are  all  classified  into  six  groups, 
based  purely  on  length  of  service.    Thus : 

Group  I — Less   than   5    yrs 10  points 

Group  2 — 5  yrs.  to  10  yrs 12  points 

Group  3 — 10  yrs.  to  15  yrs 15  points 

Group  4 — 15  yrs.  to  20  yrs 18  points 

Group  5 — 20  yrs.  to  25  yrs 21  points 

Group  6 — 25  yrs.  and  over 24  points 

The  individual  member  of  each  group  is  each  to  re- 
ceive a  uniform  sum  which  bears  the  ratio  to  sums 
received  by  individual  members  of  each  of  the  other 
groups  as  indicated  by  the  number  of  points  for  each 
group. 

Thus,  let  us  suppose  there  are  twelve  workers  in 
Group  I,  ten  in  2,  eight  in  3,  six  in  4,  four  in  5,  and 
two  in  6.  The  total  fund  available  for  distribution 
is  $36,000,  of  which  the  workers  get  one-third,  or 
$12,000. 

Total  points 
No.  of  for 

Group  Workers      Point  Index        the  group 

1  12  10  120 

2  10  12  120 

3  8  15  120 

4  6  18  108 

5  4  21  84 

6  2  24  48 

Total 600 

Since  the  total  share  is  $12,000  and  the  total  points  is 
600,  the  share  per  point  is  twenty  dollars,  and  the 


68  INDUSTRIAL  GOVERNMENT 

share  of  each  worker  in  the  several  groups  would  be 
$20.00  per  point,  or  as  follows  : 


Share  for  each 

Group 

member  of  group 

I 

$200 

2 

240 

3 

300 

4 

360 

5 

420 

6 

480 

The  fund  is  then  to  be  distributed  in  the  form,  not 
of  cash,  but  of  non-transferable,  non-voting  stock, 
known  as  "Dennison  Employees  Industrial  Partner- 
ship Stock"  with  par  value  of  ten  dollars.  Amounts 
of  less  than  ten  dollars  are  to  be  distributed  in  cash. 

Thus  each  member  of  the  above  "group  one"  would 
receive  twenty  shares  of  stock,  each  member  of  "group 
two"  would  receive  twenty-four  shares,  and  so  on.  If 
the  fund  had  been  such  as  to  amount  to  $20.50  per 
point,  each  member  of  group  one  would  receive  twenty 
shares  of  stock  and  five  dollars  in  cash,  and  members 
of  the  other  groups  in  proportion. 

This  stock  is  held  by  the  workers  only  so  long  as 
employed,  drawing  the  same  rate  of  dividends  as  the 
original  Industrial  Partnership  Stock.  If  the  worker 
should  leave  the  company  he  is  given  either  cash  at 
par  for  the  stock,  or  it  is  converted  into  Second  Pre- 
ferred Stock  at  the  rate  of  ten  shares  to  one,  since 
the  latter  has  a  par  value  of  one  hundred  dollars. 

The  administration  of  the  fund  and  its  apportion- 
ment is  democratic,  being  in  charge  of  a  committee 
consisting  of  the  chairman  of  the  General  Works  Com- 
mittee on  Operation,   in  which  the  President  of  the 


GOVERNMENT  BY  IMAGINATION       69 

Company  sits  for  these  cases  only,  and  its  decision  is 
final. 

It  is  significant  that  this  Employees'  Industrial  Part- 
nership Stock  is  non-voting.  Thus  while  one-third  of 
all  common  stock  issues  go  to  the  lower  grade  work- 
ers, the  control  of  the  company  remains  in  the  hands 
of  the  "imagination"  group  of  executives;  subject  to 
such  influence  as  is  exerted  by  the  workers'  commit- 
tees in  the  ordinary  course  of  affairs. 

However,  the  workers  are  rewarded  for  extra  ef- 
fort, for  elimination  of  waste,  and  superior  coopera- 
tion. They  get  their  share  of  the  surplus  earnings — the 
way  to  participation  in  control  is  open  to  them  through 
promotion  within  the  company.  It  may  be  that  in 
time  they  will  develop,  through  exercise  of  their  op- 
portunities and  increased  interest  in  the  business,  the 
qualities  which  will  fit  them  for  more  active  participa- 
tion in  the  management. 


VII 

COOPERATIVE  SPEEDING-UP 

The  Packard  Piano  Company  had  won  the  strike 
in  19 12.  But  the  workers  who  came  back  were  sullen, 
production  was  low,  harmony  gone.  In  the  midst  of 
this  distressing  situation  the  president  of  the  com- 
pany, Albert  S.  Bond,  chanced  to  hear  John  Leitch 
deliver  a  lecture  on  industrial  democracy. 

Leitch  is  an  industrial  evangelist.  He  converted 
Mr.  Bond.  Bond  saw  the  error  of  his  ways.  He  had 
been  a  salesman  but  he  had  not  applied  the  psychology 
of  salesmanship  to  his  employees.  He  had  been  "driv- 
ing" them,  not  "selling"  them  the  Packard  piano. 
Forthwith  he  changed  his  character  and  attitude  toward 
labor.  He  accepted  at  once  the  four  comer  stones  of 
Leitch's  Industrial  Democracy — Justice,  Cooperation, 
Economy,  Energy  and  the  capstone,  Service. 

Next  he  induced  Leitch  to  come  over  and  convert  his 
workmen.  Mass  meetings  were  held  on  company  time. 
At  first  the  men  were  cold  and  skeptical.  They  won- 
dered what  the  management  was  trying  to  "put  over." 
But  after  a  few  meetings  they,  too,  were  converted. 
When  the  psychological  hour  arrived,  Leitch  offered 
his  resolution  and  it  was  adopted: 

"We,  the  employees,  officers  and  directors  of  the  Packard 
Piano  Company,  recognizing  that  Justice  is  the  greatest 
good  and  Injustice  the  greatest  evil,  do  hereby  lay,  and  sub- 


COOPERATIVE  SPEEDING-UP  71 

scribe  to,  as  the  first  Corner  Stone  of  our  Policy,  this  great- 
est of  all  good." 

We  talked  with  Mr.  Bond  and  thirty  or  more  em- 
ployees. They  have  unbounded  faith  in  Industrial 
Democracy.  They  speak  the  common  language  of 
Justice.  The  firm  that  makes  the  best  men  will  make 
the  best  pianos.  The  great  end  of  Justice  is  "to  con- 
struct broader  character  as  individuals,"  as  the  foun- 
dation of  "broader  commerce  as  an  institution." 

Cooperation  was  the  second  corner  stone  laid  by 
John  Leitch.  Cooperation  is  the  way  to  obtain  Justice. 
In  the  other  Leitch  plants  which  we  visited  we  found 
the  whole  machinery  of  representative  democracy  ac- 
cording to  the  Constitution  of  the  United  States — a 
Cabinet,  a  Senate,  a  House  of  Representatives.  But 
the  Packard  Company  did  not  find  it  necessary  to  have 
representative  bodies  for  a  force  of  less  than  300.  So 
everybody  attends  the  meetings. 

In  the  beginning  they  held  a  meeting  every  week; 
now  about  once  a  month.  Factory  problems  are  dis- 
cussed and  decided  by  the  Committee  of  the  Whole. 
If  an  investigation  is  necessary,  a  special  committee  of 
five,  three  elected  by  the  employees  and  two  appointed 
by  the  management,  makes  the  investigation  and  report 
to  the  next  meeting. 

The  factory  was  hard  hit  in  1914,  following  the  out- 
break of  the  World  War.  A  cabinet  maker  arose  in 
the  Committee  of  the  Whole  and  suggested  that  they 
work  three  days  a  week  and  spread  the  unemployment 
over  the  entire  force  instead  of  concentrating  it.  The 
foremen  volunteered  to  reduce  their  own  salaries 
twenty-five  per  cent.     The  Committee  of  the  Whole 


72  INDUSTRIAL  GOVERNMENT 

agreed  to  operate  three  days  a  week,  but  the  manage- 
ment was  able  to  assure  them  four  days. 

A  backmaker  is  stated  to  have  told  how  cooperation 
worked  in  his  department.  "When  I  started  in  this 
work,"  he  said,  "it  took  two  men  ten  hours  to  make 
six  backs.  That's  the  same  as  one  man  working  ten 
hours  to  make  three  backs — or  a  back  every  three  and 
a  third  hours.  Now  one  man  can  complete  a  back  in 
an  hour,  and  the  work  is  much  easier  than  it  erver  was 
in  the  past.  How  did  we  do  it  ?  Well,  it  was  because 
the  Packard  Piano  Policy  got  us  to  do  it.  The  men 
at  the  head  said  to  us,  'Now,  boys,  we  all  want  to  do 
our  best,  and  sometimes  doing  our  best  doesn't  mean 
working  our  heads  off.  The  easier  our  work  becomes, 
the  better  specialists  we  become^ — so  try  to  see  if  there 
aren't  better  ways  of  doing  things.'  And  what  I 
have  told  you  about  this  department  shows  what  co- 
operation can  do." 

While  we  sat  in  the  president's  office,  several  workers 
came  to  the  door,  which  is  kept  open  without  any  sign, 
"Private."  The  workers  halted  when  they  saw  us.  In 
every  case  Mr.  Bond  excused  himself  and  gave  priority 
to  the  workers.  These  interviews  cover  every  subject 
— shop  problems,  domestic,  financial  problems.  It  is 
the  latter  that  give  to  the  president  his  opportunity  to 
win  the  confidence  of  the  workers. 

Economy  is  the  third  corner-stone.  The  "Collective 
Economy  Dividend"  is  John  Leitch's  inducement  to 
economy.  "I  take  the  cost  of  a  unit  of  production  in 
the  period  preceding  the  introduction  of  Industrial 
Democracy,"  says  Leitch,  "and  compare  that  cost  with 
results  after  Democracy  has  gone  into  effect.  If  there 
is  a  saving,  then  one-half  that  aggregate  saving  is  the 


COOPERATIVE  SPEEDING-UP  73 

amount  of  the  economy  dividend  for  the  period  and  is 
paid  to  the  men  as  an  added  percentage  to  wages." 

In  the  Packard  Piano  Company  it  is  simphfied  as 
follows :  Three  hundred  pianos  a  month  are  the  stand- 
ard. If  the  factory  turns  out  300  pianos,  the  employees 
get  5  per  cent  dividend  added  to  their  wages,  and  2j/^ 
per  cent  additional  for  every  25  in  excess  of  300.  The 
dividend  is  paid  the  first  pay  day  in  the  following 
month.  Every  day  the  bulletin  board  announces  the 
number  of  pianos  for  the  day  before  and  the  number 
up  to  that  day  for  the  month.  This  bulletin  board  is 
the  focus  of  every  eager  eye  in  the  factory.  It  tells 
them  whether  they  are  approaching  or  losing  that  co- 
operative economy  dividend.  Individually  they  are 
paid  piece-rates.  Collectively  they  get  this  added  col- 
lective piece-rate. 

The  economy  dividend  is  really  the  superstructure 
that  holds  together  the  three  corner-stones,  Coopera- 
tion, Economy,  Energy.  It  works  wonders.  During 
three  months  in  the  fall  of  19 13,  an  average  of  242 
employees,  working  ten  hours  a  day,  turned  out  746 
pianos.  For  the  corresponding  months  in  19 19,  an 
average  of  235  employees,  working  eight  hours  a  day, 
turned  out  1,100  pianos.  The  increase  in  efficiency 
amounts  to  45  per  cent  on  the  basis  of  plant  output, 
and  reduces  overhead  proportionately,  while  the  in- 
crease in  efficiency  is  86  per  cent  on  the  basis  of  work- 
man's output  per  hour,  and  increases  wages  more  than 
proportionately.  The  average  rate  of  wages  per  hour, 
for  the  same  periods,  advanced  from  28  cents  to  58 
cents,  an  increase  of  106  per  cent,  due  entirely  to  in- 
creased output  and  economy  dividend. 

See  how  it  works.     Every  employee  is  directly  in- 


74  INDUSTRIAL  GOVERNMENT 

terested  in  the  efficiency  of  his  fellow- worker.  Ab- 
senteeism cuts  down  the  economy  dividend.  Slow 
work  cuts  it  down.  Wasteful  work  cuts  it  down. 
Careless  shop  planning  and  routing  of  materials  and 
pianos  through  the  factory  cuts  it  down.  A  dozen 
placards  on  the  walls  tell  us  "200  scientific  managers 
in  this  factory."  Every  employee  is  a  scientific  man- 
ager. It  was  an  efficiency  engineer  brought  in  from  the 
outside,  whose  scientific  time  and  motion  studies  pro- 
voked the  strike  of  19 12.  That  outside  expert  is  gone, 
but  industrial  democracy  and  the  economy  dividend 
filled  the  workers  in  the  shop  with  the  spirit  of  scien- 
tific management.  The  evidence  of  it  is  everywhere. 
Not  long  after  the  efficiency  engineer  left  the  plant, 
they  had  reduced  the  hours  to  nine.  Five  months  later 
they  came  down  to  eight,  and  on  each  reduction  in 
hours  production  was  increased. 

Furthermore,  the  corner-stones.  Justice  and  Coopera- 
tion, prevent  the  piece-rate  from  being  cut  arbitrarily. 
Every  worker  is  secure  in  earning  as  much  as  he  can 
at  piece-rates,  for  he  knows  that  the  rate  will  not  be 
cut  without  his  consent.  The  president  cited  one  in- 
stance of  a  voluntary  cut  in  the  piece-rate  from  42 
cents  to  II  cents.  The  workers  could  earn  more  at 
the  new  rate  than  formerly  at  the  old  rate. 

The  foreman  is  no  longer  a  "boss."  He  is  one  of 
the  cooperators.  Here  is  where  the  other  corner-stones, 
Economy  and  Energy,  come  in.  Piece-rates  fixed  by 
cooperation  on  the  principles  of  Justice;  economy  divi- 
dend added  to  piece-rates  on  the  principles  of  Economy 
and  Energy — this  is  the  greatest  combination  of  in- 
ducements to  output  that  we  have  found  anywhere, 
measured  by  results.     In  no  place  have  we  found  the 


COOPERATIVE  SPEEDING-UP  75 

men  working  with  greater  initiative,  energy  and  speed. 
They  are  completely  absorbed  in  their  work.  Cour- 
teous, willing  to  talk  with  visitors,  proud  of  both  their 
principles  of  democracy  and  of  their  hard,  speedy  work, 
they  keep  on  working  while  they  talk.  No  boss  stands 
over  them ;  no  outsider  times  their  motions ;  they  speed 
themselves  up  cooperatively. 

This  is  the  only  place  we  found  where  pure  efficiency 
outran  the  increased  cost  of  living.  In  other  places 
piece-rates  have  been  advanced.  Here  they  have,  in 
some  cases,  been  reduced,  in  others  equalized,  but  not 
generally  advanced;  yet  their  earnings  per  hour,  the 
correct  unit  of  efficiency,  have  increased  106  per  cent, 
while  their  earnings  per  day  have  increased  66  per  cent. 
Assuming  that  the  increase  in  cost  of  living  had  been 
80  per  cent  in  1919,  the  workers'  daily  earnings  indeed 
had  not  kept  up  with  the  cost  of  living,  but  they  had 
swallowed  the  difference  in  the  increased  leisure  per 
day. 

This  comes  about  in  two  ways,  partly  by  greater  out- 
put per  individual  at  the  same  or  even  lower  piece- 
rates,  and  partly  by  the  economy  dividend,  or  collec- 
tive piece-rate,  added  on  to  their  individual  earnings. 
It  is  not  increased  rates  of  pay,  but  increased  output 
per  man  that  has  increased  their  earnings. 

The  workers  say  that  they  work  hard.  But  with 
it  they  keep  up  their  enthusiasm  and  devotion  to  In- 
dustrial Democracy.  The  company  prides  itself  on 
what  an  old  cabinet  worker  said  who  had  worked  there 
forty  years,  "Nobody  ever  cheats  on  work  around  here. 
I  can  tell  you  that  every  one  of  the  boys  likes  to  do 
his  best,  and  why  shouldn't  he?"  During  the  war  the 
company  obtained  a  contract  for  making  airplane  pro- 


76  INDUSTRIAL  GOVERNMENT 

pellers.  The  race  with  Ludendorf  was  close,  and  the 
government  was  driven  to  getting  machines  regardless 
of  cost.  The  Packard  Company  was  compelled  to  pay 
war  wages  to  airplane  workers  brought  in  from  the 
outside.  Trade  unionists  twitted  the  Packard  Family 
about  the  wage  differential  under  the  same  roof — war 
wages  on  airplanes,  peace  wages  on  pianos.  But  never 
a  ripple  on  the  placid  stream!  Justice,  Energy,  and 
Cooperation  prevailed  over  any  resentment  against 
wage  inequality. 

That  the  profits  of  the  company  have  greatly  in- 
creased is  evident.  Even  without  an  increase  in  price 
to  the  consumer  the  economy-dividend  has  added  its 
share  to  profits  as  well  as  wages,  against  which  should, 
of  course,  be  set  the  increased  prices  of  raw  material. 
The  economy-dividend  has  the  further  advantage  that 
it  does  away  with  any  necessity  of  letting  the  workers 
in  to  the  financial  affairs  or  profits  of  the  company. 
It  is  not  profit-sharing;  it  is  economy-sharing. 

Lastly  the  capstone  of  industrial  democracy  is  Serv- 
ice. In  a  way  each  worker  can  see  his  contribution 
to  the  music  of  the  world,  as  the  growing  piano  moves 
along  through  the  factory.  "Quality  shall  always  be 
the  first  element  of  our  service,  and  quantity  shall  ever 
be  the  second  consideration."  Each  worker  is  an  in- 
spector of  his  own  and  the  work  of  others.  At  the  very 
last,  before  the  instrument  leaves  the  factory,  the  highly 
skilled  piano  tuners  epitomize  the  motto  of  the  busi- 
ness: "If  there  is  no  harmony  in  the  factory,  there  will 
be  none  in  the  piano." 


VIII 
"INDUSTRIAL  DEMOCRACY" 

"We  took  as  a  sample  the  United  States  govern- 
ment, which,  having  been  successfully  established  and 
carried  out  for  over  140  years,  seemed  like  a  pretty 
fair  guide  to  go  by." 

The  Cabinet  and  Senate  hold  their  places  by  vir- 
tue of  their  positions  in  the  business.  The  Cabinet  is 
composed  of  the  chief  executives  of  the  company; 
the  Senate  of  the  foremen  and  heads  of  departments. 
The  House  of  Representatives  is  the  only  elected  body, 
elected  by  the  employees  by  secret  ballot,  approximately 
one  representative  to  every  30  workers.  The  only 
qualifications  for  membership  in  the  House  are  ability 
to  speak  and  understand  the  English  language,  em- 
ployment in  the  works  for  at  least  one  year,  and  "on 
the  level." 

The  United  States  government  has  no  provision  for 
collective  bargaining.  When  the  Demuth  House  of 
Representatives  began  to  talk  about  wages  the  Cabinet 
replied  that  they  could  increase  their  wages  by  increas- 
ing production,  since  increased  production  would  in- 
crease the  collective-economy-dividend. 

John  Leitch  had  not  worked  out  an  accounting 
system  to  back  up  his  collective-economy-dividend. 
The  Company  did  not  know  for  any  month  just  what 
the  increase  in  efficiency  or  collective  savings  had  been, 

77 


78  INDUSTRIAL  GOVERNMENT 

and  was  obliged  to  approximate  the  amount  every  two 
weeks.  The  employees  finally  detected  this  defect  and 
lost  their  zeal  for  speeding  up.  But,  at  first,  it  worked. 
The  first  employees'  dividend  was  6^  per  cent.  As 
high  as  173^  per  cent  was  paid.  Contests  were  worked 
up  between  departments,  the  prize  being  a  large  Ameri- 
can flag.  A  department  winning  the  highest  efificiency 
honors  the  third  time  in  succession  was  dined  by  the 
other  departments.  The  losing  departments  began  to 
put  pressure  on  their  loafers  and  slackers.  A  commit- 
tee was  appointed  by  the  House  to  work  out  a  penal 
code  for  careless,  tardy  and  shirking  workers.  "You 
are  stealing  my  dividends,"  said  the  worker  to  the 
shirker.    The  latter  were  gradually  squeezed  out. 

Yet  the  Company,  at  the  end  of  two  years,  could  not 
say  definitely  whether  or  not  Industrial  Democracy  had 
reduced  the  costs  of  production,  although  convinced 
that  under  the  old  system  they  would  have  had  a  much 
more  rapidly  rising  scale  of  wages  and  the  other  dififi- 
culties  suffered  by  other  firms. 

No  plan  of  industrial  government  that  we  have  found 
has  accomplished  more  in  the  way  of  increasing  the 
output  than  the  John  Leitch  plan  of  Industrial  Democ- 
racy and  collective-economy-dividend.  We  saw  in  the 
Packard  Piano  Company  that  it  had  almost  doubled 
the  efficiency  of  the  workers.  But  the  limit  had  appar- 
ently been  reached  at  Demuth's  in  the  summer  of  19 19 
when  it  had  added  something  less  than  50  per  cent  to 
wages. 

Yet  the  cost  of  living  had  gone  up  80  per  cent. 

The  workers  at  Demuth's  could  see  about  them  in 
Brooklyn  and  New  York  that  other  workers  had  in- 
creased their  wages  80  per  cent,  even  100  per  cent, 


"INDUSTRIAL  DEMOCRACY"  79 

without  increasing  their  efficiency  and  without  Indus- 
trial Democracy,  Somebody  in  the  House  of  Repre- 
sentatives suggested  an  increase  without  waiting  for  a 
further  increase  in  the  economy-dividend. 

But  the  remarkable  success  of  Industrial  Democracy 
smothered  the  suggestion.  About  that  time  the  Com- 
pany printed  a  statement  of  one  of  the  representatives 
elected  by  the  workers.    He  said, 

"I  have  seen  Industrial  Democracy  in  operation  at  this 
factory  for  the  past  two  years,  and  the  main  reason  I  am  for 
it,  heart  and  soul,  is  because  I  know  that  through  it  I  can 
always  get   a   square   deal. 

"When  a  man  in  my  department  has  a  grievance,  he  comes 
to  me  and  tells  me  about  it  and  he  knows  that  I  will  take 
the  question  up  at  the  next  meeting  of  the  House  of 
Representatives,  and  consequently  the  foremen  in  the  Senate 
and  the  'Bosses'  in  the  Cabinet  will  know  about  it.  They 
will  act  on  it  one  way  or  another  and  my  experience  has 
been  that  every  question  has  been  settled  fairly. 

"Before  we  had  Industrial  Democracy  a  man  with  any 
cause  for  dissatisfaction  would  most  likely  keep  it  to  him- 
self or  tell  the  other  workers  about  it.  Perhaps  the  manager 
would  be  too  busy  to  listen  to  him,  so  he  would  nurse  his 
grievance  and  very  likely  he  would  quit.  Industrial  Democ- 
racy prevents  just  such  little  troubles  before  they  get  big. 

"Nowadays  at  the  plant  you  never  hear  a  foreman  urging 
the  men  to  get  on  the  job.  There  is  no  need  for  it.  We 
all  know  that  by  doing  our  best  all  the  time  we  are  in- 
creasing our  own  dividends.  Now  whenever  a  man  'knocks 
off'  early,  comes  in  late  or  takes  a  holiday,  it  is  the  other 
men  and  women  workers  whose  dividends  he  is  lowering. 
Before  Industrial  Democracy  was  put  into  effect,  it  was 
every  man  for  himself;  now,  it  is  all  for  one  and  one  for 
all.  I  have  been  in  this  shop  for  twenty  years  and  I  have 
never  seen  the  desire  to  cooperate  with  the  other  depart- 
ments and  help  the  other  fellow  out  so  strong  as  it  is  now. 

"Years  ago  if  a  worker  had  a  grudge  against  the  fore- 


8o  INDUSTRIAL  GOVERNMENT 

man  he  would  probably  lay  down  on  the  job  whenever  he 
thought  he  wasn't  being  watched;  but  that  is  a  thing  of  the 
past,  for  whatever  complaints  a  man  has  are  now  always 
quickly  settled  in  a  way  satisfactory  to  everybody. 

"And  another  thing.  Industrial  Democracy  has  proven 
that  some  of  our  men  had  stored  up  in  their  minds  ideas 
for  new  machinery  and  other  labor  saving  devices;  but 
they  kept  these  plans  to  themselves  because  they  were  not 
sure  of  their  reception  by  the  management.  Now,  a  man 
with  a  good  idea  knows  that  not  only  will  his  suggestion 
be  welcome,  but  that  if  practicable  it  will  be  rewarded.  In 
our  plant  today,  labor  and  time  saving  machinery  invented 
by  the  men  is  lowering  the  costs,  increasing  production, 
and  thus  earning  dividends. 

"Industrial  Democracy  has  given  us  our  say  in  the  man- 
agement of  the  shop;  it  has  reduced  our  working  hours  per 
week  from  53  to  48;  it  has  given  us  insurance;  it  has  given 
us  a  lunch  room  where  we  can  get  good  meals  for  twenty 
cents;  it  has  made  this  shop  a  better  place  to  work  in;  it 
is  teaching  English  to  our  foreigners  and  helping  them  to 
become  Americans;  it  has  taught  us  that  the  firm  has 
troubles  and  worries  just  the  same  as  we  have,  and  that  by 
working  and  cooperating  together,  we  all  benefit. 

"That  is  what  I  think  of  Industrial  Democracy  as  I  see 
it  at  the  Demuth  plant  and  I  think  that  all  of  the  nine 
hundred  workers  here  agree  with  me." 

This  was  In  the  spring  of  1919.  Each  one  of  the 
four  cornerstones  and  the  capstone  of  Leitch's  Indus- 
trial Democracy — Justice,  Cooperation,  Economy,  En- 
ergy and  Service — apparently  was  solid  and  in  its 
place.  But  wages  were  not  keeping  up  with  the  cost  of 
living. 

Really,  it  was  too  much  to  expect.  If  every  factory 
and  firm  in  the  United  States  had  adopted  Industrial 
Democracy  and  doubled  its  output,  prices  would  still 
have  gone  up,  if  the  world's  supply  of  gold,  paper 


"INDUSTRIAL  DEMOCRACY"  8i 

money,  and  credit  instruments  had  more  than  doubled. 
We  know  that  all  of  them  did  not  adopt  Industrial 
Democracy  nor  double  their  output,  and  so,  much  less 
than  double  the  supply  of  money  and  credit  was  needed 
to  double  the  prices. 

Industrial  Democracy  at  Demuth's  might  have  sailed 
triumphant,  had  John  Leitch  grasped  the  currency  situ- 
ation. As  it  was,  when  some  one  suggested  an  increase 
of  wages,  he  only  answered  the  House  of  Representa- 
tives in  effect :  "See  what  you  have  already  done.  You 
have  increased  your  earnings  50  per  cent  and  reduced 
your  hours  from  53  to  48 !  Industrial  Democracy  is 
no  longer  an  experiment.  You  have  it  in  your  own 
power  to  increase  your  earnings  70,  80  and  100  per 
cent.  And  see  the  service  you  have  rendered  to  Society. 
You  have  increased  earnings  50  per  cent  but  Society 
is  not  compelled  to  pay  any  more  for  smoking  pipes 
on  that  account.  The  labor-cost  of  a  pipe  has  not  in- 
creased. Keep  it  up.  Raise  your  wages  100  per  cent, 
but  do  not  force  us  to  raise  the  price  of  pipes." 

The  House  of  Representatives  could  not  answer  this 
appeal.  The  Representatives  were  silenced.  Democ- 
racy was  a  success,  and  they  knew  it.  But,  somehow, 
democracy  was  not  keeping  pace  with  the  cost  of  living. 
Other  places  without  democracy  were  keeping  pace. 
It  was  puzzling.  Other  places  were  doing  even  better. 
In  the  clothing  trades,  immigrants  like  themselves, 
Jews,  Poles,  Lithuanians  and  a  dozen  nationalities,  had 
gained  44  hours  a  week,  and  much  more  than  50  per 
cent  increase  in  earnings. 

The  acquiescence  of  the  House  was  bringing  it  into 
discredit.  Representatives  were  taunted.  They  began 
to  drop  out  of  the  meetings.    Mistakes  had  been  made. 


82  INDUSTRIAL  GOVERNMENT 

In  1918  twenty-five  men  in  a  certain  department  de- 
sired an  increase  in  wages.  An  outsider  agitator  was 
urging  them  to  strike,  but  they  submitted  their  case  to 
the  House.  A  committee  of  the  House  investigated. 
It  denounced  the  twenty-five,  charging  that  they  were 
"absolutely  unfair  in  their  demands."  The  House  ac- 
cepted the  report.  The  company  published  it  as  a 
triumph  of  "Industrial  Democracy."  It  was  really  a 
"handle"  for  the  trade  union  organizer. 

While  the  House  was  dormant  on  the  wage  question, 
the  union  organizers  were  at  work.  The  union  prom- 
ised action  and  results.  Workers  began  transferring 
their  allegiance  to  the  Smoking-Pipe  Workers'  Union, 
not  afifiliated  with  the  American  Federation  of  Labor. 
The  House  was  spurred  to  action.  This  time  it  was 
the  44-hour  week.  The  spokesman  of  the  company 
in  the  House  denounced  it  as  Bolshevism  and  gave 
high  praise  to  the  American  Federation  of  Labor  and 
Samuel  Gompers,  who,  he  said,  stood  for  the  Ameri- 
can 48-hour  week.  The  "Bolshevists"  were  voted 
down. 

But  this  did  not  end  the  discussion.  The  House 
again  broke  silence  and  demanded  both  the  44-hour 
week  and  20  per  cent  advance  in  wages. 

The  company  came  forward  with  a  compromise. 
They  would  grant  the  44  hours.  By  Economy,  Co- 
operation and  Ef^ciency,  as  much  could  be  produced  in 
44  hours  as  in  48  hours.  Former  reductions  in  hours 
had  actually  increased  the  output.     So  would  this. 

But  the  20  per  cent  increase  in  piece-rates  would 
compel  the  company  to  increase  the  price  of  pipes  to 
Society  and  this  was  contrary  to  the  capstone.  Service. 
Besides,  Society  would  buy  less  pipes.     This  meant 


"INDUSTRIAL  DEMOCRACY"  83 

less  work.  This  meant  unemployment  and  less  earn- 
ings. No.  The  employees  must  earn  their  increase  in 
wages  by  greater  production  and  thus  maintain  the 
capstone,  Service. 

A  deadlock  followed.  The  union  gained.  Indus- 
trial Democracy  was  set  aside.  The  strike  began.  The 
company  countered  with  a  lockout.  The  union  came 
to  the  aid  of  the  strikers  with  strike  benefits.  Then, 
after  six  or  seven  weeks,  the  other  companies  ordered 
their  employees  to  stop  support  of  the  Demuth  work- 
ers.   Then  the  general  strike. 

The  Demuth  Company  resumed  after  two  weeks  of 
lockout.  Many  of  the  old  workers  returned.  The 
union  claimed  that  one-third  had  quit  for  good.  The 
company  claimed  that  it  had  eliminated  the  undesirable 
element. 

Industrial  Democracy  was  resumed,  with  few 
changes.  The  minutes  of  the  meetings  are  now  posted 
in  the  shop.  Each  employee  is  given  a  copy  of  the 
plan  and  required  to  sign  a  pledge  to  abide  by  and  up- 
hold Industrial  Democracy.  No  person  not  speaking 
English  and  not  a  citizen,  by  fact  or  declaration,  is 
employed.  A  125^  per  cent  increase  in  wages  is 
granted. 

It  is  no  reproach  on  Industrial  Democracy  that  it 
should  have  failed  to  cope  with  the  jumping  cost  of 
living.  Democracy,  autocracy,  collective  bargaining, 
all  of  them  fail,  when  the  dollar  runs  amuck.  We 
visited  John  Leuch.  He  had  so  many  calls  from  em- 
ployers that  he  could  not  listen  to  our  query.  He 
referred  us  to  his  book.  He  is  not  an  institution.  He 
cannot  delegate  his  methods  to  a  staff  of  subordinates. 
He  must  go  in  person.     His   is  the  heart-to-heart 


84  INDUSTRIAL  GOVERNMENT 

method — the  method  of  the  industrial  revivalist — the 
John  the  Baptist  of  Industry.  He  converts  first  the 
employer  in  person,  then  the  employees  in  mass.  He 
stays  with  them  at  least  one  day  a  week.  Hence  his 
clientele  is  limited. 

For  many  years  he  went  from  job  to  job,  on  his  own 
wages,  seeking  an  answer  to  his  question.  He  saw 
"employees  come  and  go,  live  and  die,  without  a 
thought  on  the  part  of  employers  as  to  their  welfare." 
He  saw  "employees  show  an  equal  lack  of  interest  in 
the  employers,  and  demonstrated  their  disinterestedness 
by  pointedly  doing  just  as  little  as  they  possibly  could 
for  their  wages."  He  could  find  "no  relation  between 
work  and  wages.  The  employer  paid  the  lowest  wage 
at  which  he  could  get  men,  and  the  worker  gave  the 
smallest  return  which  he  could  possibly  give  and  still 
get  the  highest  wages."  Inside  each  business  concern 
he  found  "ruinous  competition  between  labor  and  capi- 
tal— the  one  to  get  more,  the  other  to  give  less."  "Out 
of  that  first-hand  investigation,"  he  goes  on,  "pursued 
without  theories  and  without  a  knowledge  of  philoso- 
phy, came  a  gradual  comprehension  that  there  could 
be  a  better  way.  Seeking  the  why  and  the  how  led  me 
into  philosophy — into  the  causes  behind  what  we  call 
results — and  step  by  step  unfolded  that  which  I  now 
call  Industrial  Democracy." 

At  last  he  found  his  opportunity.  He  was  superin- 
tendent of  a  small  plant,  without  a  labor  union.  He 
held  mass  meetings.  They  "talked  over  the  manage- 
ment of  the  factory,  better  ways  of  doing  work,  etc." 

It  worked.  His  "fundamental  ideas  were  right." 
"The  men  liked  the  meetings ;  they  liked  the  chance  to 
air  their  troubles,  to  have  it  out  over  anything  that  did 


"INDUSTRIAL  DEMOCRACY"  85 

not  satisfy  them;  and  gradually  it  dawned  on  me  that 
this  desire  to  talk  and  to  have  a  say  in  things  was  the 
bubbling  to  the  surface  of  the  innate  spirit  of  democ- 
racy— of  the  desire  which  is  in  almost  every  man  to 
have  a  voice  in  his  own  destiny  and  a  means  for  self- 
expression.  Analyzing  my  personal  work,  I  found  that 
what  I  had  really  done  was  to  capitalize  fair  play — 
to  sell  the  management  to  the  men,  to  convince  them 
that  their  meetings  were  of  importance  and  not  merely 
opportunities  to  blow  off  steam." 

The  next  quest  was  to  find  a  method  of  industrial 
organization  that  would  make  these  meetings  a  fixed 
part  of  the  business.  So  far  Industrial  Democracy 
was  only  "a  state  of  mind."  It  must  have  a  body 
and  a  constitution.  This  was  the  final  discovery. 
"The  organization  of  any  factory  or  other  business 
institution  into  a  little  democratic  state,  with  a  repre- 
sentative government  which  shall  have  both  its  legis- 
lative and  executive  phases."  There  was  but  one  such 
model — the  Constitution  of  the  United  States.  So  he 
seized  upon  it.  "I  am  taking  as  settled  without  argu- 
ment," he  exclaimed,  "that  American  principles  of  de- 
mocracy are  right  and  then  making  application  of  these 
principles  to  the  governing  of  a  factory." 

So  it  came  about  that  Industrial  Democracy  is  mod- 
eled on  the  Constitution  of  the  United  States.  It  has 
its  Cabinet — the  President  and  Chiefs  of  the  Busi- 
ness ;  its  Senate — the  foremen  and  heads  of  depart- 
ments ;  its  House  of  Representatives — the  workers 
elected  by  their  fellow-workers  on  a  basis  of  equal  suf- 
frage in  each  department  or  section  of  the  shop. 

Thus  Industrial  Democracy  is  the  repetition  of  Po- 
litical Democracy — with  two  important  exceptions — 


86  INDUSTRIAL  GOVERNMENT 

the  President  and  Senate  are  not  elected  by  the  peo- 
ple. Yet,  such  as  it  was  it  grew  many  years  in  the 
mind  of  John  Leitch,  and  finally,  when  he  came  out 
of  the  wilderness  of  competition,  he  had  it  full  ready 
to  proclaim,  "The  Kingdom  of  Democracy  is  at 
Hand."  Some  of  the  seed  fell  upon  stony  places  and 
sprang  up  but  withered  away,  because  the  employer 
saw  only  another  device  to  put  something  over  on 
his  workers.  Some  fell  into  good  ground  and  brought 
forth  justice  and  efficiency  because  the  employer's 
heart  was  reached  and  he  was  completely  converted. 
And  some  fell  among  thorns ;  and  the  high  cost  of  liv- 
ing sprang  up  and  choked  them. 


IX 


FROM  POLITICAL  TO  INDUSTRIAL 
GOVERNMENT 

In  19 14  John  Leitch  "sold"  the  idea  of  "Industrial 
Democracy"  to  the  management  and  employees  of  the 
Printz-Biederman  Company,  Cleveland,  Ohio.  The 
shop  organization  has  had  all  the  features  of  the  Leitch 
system :  A  senate,  a  house  of  representatives,  a  cab- 
inet, and  a  collective  economy  dividend. 

In  his  book  ^  Leitch  assumed  "as  settled  without  ar- 
gument that  American  principles  of  democracy  are 
right,"  and  made  "application  of  these  principles  to 
the  government  of  a  factory."  He  defined  industrial 
democracy  as  "the  organization  of  any  factory  or  other 
business  institution  into  a  Httle  democratic  state,  with 
a  representative  government  which  shall  have  both  its 
legislative  and  executive  phases."  An  examination  of 
the  Leitch  plan,  however,  reveals  considerable  differ- 
ences between  it  and  the  United  States  Government. 
The  latter  is  made  up  of  representatives  from  one  body 
— the  citizens  of  the  Republic.  Representatives,  Sen- 
ators, President,  all  come  from  and  represent  the  same 
great  constituency,  while  in  industry  there  are  capital 
and  labor  to  be  represented.  Leitch  met  this  dualism 
by  giving  the  employees  a  house  of  representatives 
and  by  giving  the  management  a  Senate  and  cabinet. 

*  Leitch,  John.  "Man  to  Man."  The  story  of  Industrial  De- 
mocracy.   New  York,  1919,  249  pp. 

87 


88  INDUSTRIAL  GOVERNMENT 

The  Government  of  the  United  States  was  designed 
to  promote  deliberation  and  to  prevent  quick  action. 
Each  house  of  legislation  acts  as  a  check  upon  the 
other ;  each  department  of  Government  acts  as  a  check 
upon  another  department ;  so  that  our  Government  has 
been  characterized  as  a  system  of  checks  and  balances. 
Industry,  on  the  other  hand,  must  have  action — prompt 
action — and  output.  The  question  arises  :  Can  a  form 
of  government  that  "balances"  authority  and  pro- 
motes deliberation  rather  than  action  be  appropriated 
for  industry  with  its  need  of  prompt  settlement  of 
disputed  questions? 

Leitch  simply  added  a  "legislative"  to  the  already 
existing  "executive"  phase  of  shop  government.  As 
regards  the  popular  branch  of  the  organization,  legis- 
lation becomes  the  major  problem,  the  working  out  of 
which  involves  two  things :  (a)  Evolving  a  method 
of  legislation,  and  (b)  creating  a  form  of  government 
suited  to  that  method. 

The  tense  labor  situation  that  began  with  the  spring 
of  191 8  and  held  throughout  19 19  brought  to  this  shop 
its  critical  period  and  forced  a  solution  of  these  prob- 
lems. There  arose  in  acute  form  the  questions  of 
wages  and  hours,  of  the  form  of  government,  of  meth- 
ods of  adjusting  grievances,  besides  a  multitude  of 
grievances  covering  every  imaginable  phase  of  the 
bonus  question.  The  machinery  for  adjusting  griev- 
ances was  clumsy  and  at  this  time  clogged  up;  for  up 
to  this  time  grievances  had  to  be  acted  upon  by  the 
house,  passed  on  to  the  senate,  and  then  on  to  the  cab- 
inet before  a  settlement  could  be  effected.  If  the  sen- 
ate refused  to  concur,  there  followed  a  delay  while  the 
differences  between  the  two  houses  were  being  ironed 


INDUSTRIAL  GOVERNMENT  89 

out.  It  was  a  slow  process  at  best,  and  this  was  a  time 
that  brooked  no  delays.  Both  sides  recognized  that 
"industrial  democracy"  had  to  be  speeded  up. 
When,  therefore,  a  suggestion  was  made  to  the  house, 
April  16,  19 18,  that  a  wage  rate  committee  be  selected 
and  given  full  power  to  take  up  with  the  management 
directly  complaints  about  wage  and  bonus  payments 
and  settle  them,  it  found  a  ready  response,  and  at  a 
special  meeting  the  next  day  the  house  agreed  to  cre- 
ate such  a  committee.  A  wage-rate  committee,  con- 
sisting of  one  member  from  each  department,  was  then 
made  one  of  the  permanent  committees  of  the  house. 
All  the  accumulated  complaints  were  turned  over 
to  the  new  committee.  For  one  whole  year  the  com- 
mittee busied  itself  investigating  individual  cases.  The 
company  was  anxious  to  adjust  these  complaints  satis- 
factorily to  the  employees  and  willingly  cooperated  to 
that  end.  But  it  proved  a  never-ending  job,  for  while 
the  committee  was  investigating  and  settling  one  case 
there  was  another  case — sometimes  two  or  three  cases 
— added  to  the  waiting  list.  The  year's  experience 
taught  the  committee  that  the  way  to  handle  a  multi- 
tude of  individual  cases  is  to  classify  them  and  then 
make  regulations  for  each  class. 

HIGH-COST-OF-LIVING    BONUS    CONVERTED    INTO    WAGE 
INCREASE 

In  January,  19 18,  the  management  introduced  a 
high -cost-of-living  bonus,  which  was  intended  to  be 
the  means  of  keeping  wages  in  step  with  the  cost  of 
living.  The  amount  of  this  bonus,  which  was  to  be 
varied  from  month  to  month  on  the  basis  of  Brad- 


90  INDUSTRIAL  GOVERNMENT 

street's  index  number,  was  put  into  a  separate  envelope 
so  tliat  employees  would  not  confuse  it  with  their 
regular  wages.  This  seems  to  have  complicated  the 
bonus  system.  The  production  bonus  was  the  suc- 
cessor of  the  old  collective  economy  dividend,  which 
was  a  group  incentive  plan.  At  this  time  there  were 
four  classes  of  production  bonuses,  based  upon  the  per 
cent  of  the  "standard  time"  used  in  completing  the 
task.  Thus,  for  example,  employees  who  performed 
a  given  task  in  from  130  to  115  per  cent  of  the  stand- 
ard time  were  put  in  class  i ;  from  115  to  100  per  cent 
of  standard  time,  in  class  2;  from  100  to  85  per  cent, 
in  class  3 ;  85  per  cent  and  lower,  in  class  4.  The 
house  had  voted  its  approval  of  the  high-cost-of -living 
bonus,  but  it  made  the  bonus  system  top  heavy.  The 
dissatisfaction  which  developed  soon  crystallized  into 
a  demand  for  converting  the  bonus  into  a  wage  in- 
crease. 

On  July  30,  19 18,  the  wage-rate  committee  pro- 
posed to  the  management  that  a  12  per  cent  increase 
in  wages  be  substituted  for  the  high-cost-of -living 
bonus.  At  the  following  meeting  of  the  house  a  rep- 
resentative of  the  company  appeared  to  explain  why 
this  additional  bonus  had  been  granted  instead  of  an 
increase  in  wages.  The  house  took  no  action  at  this 
meeting,  as  it  is  the  policy  of  each  side  to  try  first  to 
come  to  an  understanding  with  the  other  side  before 
taking  action,  but  at  the  next  meeting  a  bill  was  passed 
providing  for  the  wage  increase.  The  house  accom- 
panied this  bill  with  a  statement  of  its  intention  to 
ask  for  wage  increases  from  time  to  time  to  correspond 
to  the  rising  cost  of  living.  The  senate  and  cabinet 
concurred  in  the  action  of  the  house. 


INDUSTRIAL  GOVERNMENT  91 

RESULT  OF  ONE  TEST  OF  INDUSTRIAL  DEMOCRACY 

During  the  summer  of  1918  the  International  Ladies' 
Garment  Workers  estabHshed  their  union  in  many  fac- 
tories of  the  city.  The  union  organizers  look  with  no 
more  favor  uj>on  Leitch's  "industrial  democracy"  than 
upon  the  "Rockefeller  plan."  They  tried  to  organize 
this  factory  along  with  the  others.  They  engaged  the 
employees  in  conversation  and  asked  them  all  kinds 
of  questions  about  their  "industrial  democracy,"  their 
bonuses,  and  their  wages.  When  an  employee  men- 
tioned his  wage  rates,  the  organizer  would  tell  him 
about  the  rates  in  New  York  and  would  compare  in 
dollars  and  cents  the  value  to  the  worker  of  "indus- 
trial democracy"  and  the  union.  If  an  employee  got 
tangled  up  in  trying  to  explain  his  bonus  system,  the 
organizer  "kidded"  him  about  it,  and  wondered  if  he 
wouldn't  like  to  have  a  system  he  could  understand. 
The  union  won  but  very  few  sympathizers,  but  among 
these  was  a  member  of  the  house.  There  were  a  num- 
ber of  questions  pending  between  the  employees  and 
the  firm,  and  the  union  activity  helped  bring  them  to 
a  focus.  There  had  to  be  action,  and  a  joint  discus- 
sion of  the  situation  took  place  before  the  house. 

The  spokesman  for  the  employees  reminded  the  man- 
agement of  the  constantly  rising  cost  of  living  and  the 
hardships  it  was  imposing  upon  the  workers.  The 
workers,  he  continued,  not  only  had  to  support  them- 
selves and  families  but  were  also  being  constantly  so- 
licited for  subscriptions  to  Liberty  Bond  issues  and  the 
many  other  voluntary  war  activities.  Then,  too,  there 
was  the  higher  wages  in  New  York.     Were  they  not 


92  INDUSTRIAL  GOVERNMENT 

worthy  of  as  good  wages  as  the  garment  workers  in 
New  York? 

To  this  the  spokesman  for  the  management  repHed 
in  substance :  You  should  take  the  seasonal  char- 
acter of  the  industry  in  New  York  into  consideration 
when  comparing  the  wages  paid  in  the  two  cities.  This 
company  by  careful  planning  and  with  your  coopera- 
tion has  circumvented  this  seasonal  character  of  our 
industry  and  can  provide  steady  employment  the  year 
round.  The  New  York  firms,  not  having  made  these 
arrangements,  are  obliged  to  take  orders  when  they 
come  and  shut  down  when  the  season  ends.  This 
means  periods  of  unemployment  for  the  workers  there. 
If  you  compare  your  annual  wages  with  the  annual 
wages  of  the  New  York  clothing  workers,  you  will  find 
that  your  wages  average  more  than  theirs.  No  doubt 
the  employees  in  New  York  have  increased  their 
hourly  and  daily  rates  by  resorting  to  strikes.  But 
these  very  strikes  bring  chaos  into  the  industry  there, 
manufacturers  are  unable  to  avoid  seasonal  shut- 
downs, and  what  the  employees  gain  by  the  strike  they 
lose  again  during  the  long  periods  of  unemployment. 
The  situation  in  New  York  can  be  duplicated  here  if 
the  employees  will  it,  by  substituting  the  method  of  the 
strike  for  the  method  of  cooperation.  The  greater 
the  stability  of  the  firm  the  more  prosperous  it  is  and 
the  better  able  to  pay  wages  to  its  employees.  When 
the  clothing  workers  strike  in  New  York,  the  firms 
there  are  at  a  disadvantage  with  the  firms,  not  tied  up, 
elsewhere.  This  firm  has  had  the  advantage  over  their 
New  York  competitors,  has  not  had  to  shut  down,  and 
has  been  paying  the  greatest  annual  wage.  If  a  strike 
comes,  the  situation  will  be  reversed.     The  company 


INDUSTRIAL  GOVERNMENT  93 

will  be  at  a  disadvantage  with  competitors,  will  lose 
trade,  will  have  all  plans  for  stabilizing  the  industry- 
upset,  and  will  probably  have  to  bow  to  the  seasonal 
fluctuations.  You  are  partners  in  the  good  or  bad  for- 
tunes of  the  industry.  You  have  your  choice  of  al- 
ternatives. 

After  the  close  of  the  discussion  the  house  refused 
any  sanction  to  strike,  and  condemned  the  union  for 
"threatening  to  call  a  strike  without  our  approval." 
The  wage-rate  committee  was  instructed  to  hasten  the 
two  proposals  which  it  was  handling,  namely,  a  re- 
vision of  the  rate  schedules,  and  the  transfer,  which 
has  already  been  described,  of  the  high-cost-of-living 
bonus  to  the  regular  pay  envelope. 

The  union  called  a  strike.  A  few  of  the  employees 
joined  the  strike  in  spite  of  the  action  of  the  house,  but, 
so  far  as  this  firm  was  concerned,  the  strike  was  in- 
consequential. However,  when  the  house  found  out 
that  one  of  its  members  sympathized  with  the  union  it 
promptly  expelled  him.  Later  the  company  dis- 
charged this  ex-member  of  the  house  and  another  em- 
ployee. When  the  union  leaders  heard  about  these 
dismissals  they  had  the  company  haled  before  the  War 
Labor  Board  on  charges  of  discrimination  against 
trade-unionists.  If  the  union  had  succeeded  in  estab- 
lishing a  case  against  the  firm,  it  would  have  been 
ground  for  bringing  the  company  under  the  award 
of  the  War  Labor  Board.  This  would  have  meant, 
practically,  the  adjournment  of  the  "industrial  democ- 
racy." 

Neither  the  management  nor  the  house  desired  to 
see  this  happen.  The  case  was  long  drawn  out  and 
stubbornly  fought,  though  the  company  did  not  make 


94  INDUSTRIAL  GOVERNMENT 

out  a  very  strong  case  for  itself.  It  had  dismissed 
these  employees  for  making  trouble,  but  the  union 
and  dismissed  employees  replied  that  it  was  merely 
another  case  of  malice  toward  trade-unionists.  The 
company  might  have  lost  the  case  if  a  delegation  from 
the  house  had  not  defended  these  dismissals  before  the 
War  Labor  Board  upon  the  ground  of  disloyalty  to 
the  existing  organization  in  the  shop.  They  told  the 
board  that  the  employees  had  the  kind  of  organization 
that  the  great  majority  of  them  wanted,  and  that  they 
had  the  same  right  to  expect  loyalty  to  their  organiza- 
tion that  the  union  had  to  exact  it  from  union  mem- 
bers. They  told  the  board,  further,  that  they  wished 
to  continue  to  settle  their  affairs  directly  with  the 
company,  and  protested  vigorously  against  being 
brought  under  the  award. 

The  company  was  not  brought  under  the  award,  but 
there  was  a  general  feeling  that  it  had  had  a  narrow 
escape.  The  house  discussed  the  matter  and  con- 
cluded that,  since  such  controversies  involve  the  house 
as  well  as  the  firm,  the  company  should  not  take  action 
of  this  kind  in  the  future  without  first  getting  the 
approval  of  the  house.  The  house  concluded,  also, 
that  the  handling  of  grievances  should  be  speeded  up, 
so  it  submitted  two  proposals  to  the  senate  and  the 
cabinet,  one  providing  for  joint  action  in  discharging 
employees,  and  the  other  providing  that  all  grievances 
respecting  wages,  hours,  and  bonuses  be  handled  by 
the  wage-rate  committee  without  previous  reference 
to  the  employment  department.  Both  proposals  were 
concurred  in  by  the  senate  and  the  cabinet. 

The  union  had  charged  that  the  house  was  dominated 
by  the  company.     The  company  executives  had  fre- 


INDUSTRIAL  GOVERNMENT  95 

quently  participated  in  discussions  before  the  house,  as 
they  are  doing  in  other  Leitch  organizations.  It  is  not 
affirmed  that  this  accusation  of  the  union  had  any  in- 
fluence on  the  subsequent  action  of  the  house,  but,  at 
any  rate,  a  resolution  was  adopted  soon  afterwards 
that  company  representatives  be  permitted  to  be  pres- 
ent only  upon  the  invitation  of  the  chairman  of  the 
house,  and  that  they  be  required  to  retire  immediately 
after  their  remarks.  The  aggressive  temper  of  the 
house  was  shown  again  a  little  later  by  its  dismissal 
of  the  betterment  committee  and  the  appointment  of 
a  new  one  because  it  was  convinced  that  the  old  com- 
mittee was  not  doing  its  duty. 

REVISION   OF   THE   CONSTITUTION 

The  annual  elections  took  place  about  October  i, 
19 1 8.  Sentiment  was  strong  for  a  revision  of  the  con- 
stitution and  a  simplification  of  the  government.  When 
the  house  reorganized  on  October  8  the  president  ad- 
vocated larger  powers  for  the  house  and  its  further 
separation  from  the  management.  He  urged  the  house 
to  have  its  own  secretary  and  treasurer  and  pay  them 
out  of  its  own  funds.  Two  weeks  later  a  committee 
was  appointed  to  revise  the  constitution. 

The  revised  constitution  was  submitted  to  the  house 
on  November  26,  19 18.  It  provided  a  house  of  rep- 
resentatives to  deal  directly  with  the  management  and 
abolished  the  senate.  The  factory  organization  had 
begun  with  one  house — the  senate.  Six  months  later 
the  house  of  representatives  and  the  cabinet  were 
added.  But  the  senate  had  proved  a  failure  as  a  leg- 
islative body,  although  it  had  served  its  purpose  as  a 


96  INDUSTRIAL  GOVERNMENT 

training  school.  Now  the  organization  was  again  to 
be  a  one-house  affair,  but  the  employees'  house.  The 
new  constitution  was  adopted  by  the  house  and  ap- 
proved by  the  senate  and  cabinet.  The  old  system 
had  not  provided  the  expected  direct  contact  of  the 
management  with  the  employees.  The  senate  was  al- 
ways a  buffer.  The  management  now  has  a  planning 
board  of  six  members  through  which  it  deals  with  the 
house.  This  board  meets  twice  a  week  and  keeps  in 
close  touch  with  the  house  committees.  By  such  con- 
sultation and  cooperation  it  is  possible  for  the  house 
to  know  the  management's  position  on  proposals  that 
are  submitted  to  it  by  the  committees. 

REVISION  OF  WAGE  RATES PHYSICAL  EXAMINATION  OF 

WORKERS 

While  the  house  was  busy  with  the  revision  of  the 
constitution,  the  wage-rate  committee  was  preparing 
a  revision  of  the  rates.  The  work  of  the  committee 
had  been  hampered  both  by  the  previous  method  of 
revising  rates,  which  was  not  abandoned  until  August, 
19 1 8,  and  by  the  uncertainty  of  the  outcome  of  the 
controversy  with  the  War  Labor  Board.  If  the  com- 
pany had  been  brought  under  the  award,  the  employees 
would  have  been  bound  by  the  rates  specified  in  the 
award,  and  the  wage-rate  committee  would  have  been 
powerless  until  its  expiration.  As  soon  as  assurances 
came  that  their  desire  to  remain  independent  would 
be  respected,  the  committee  began  preparing  the  new 
schedules. 

For  the  purpose  of  this  revision  employees  were  clas- 
sified according  to  the  degree  of  difficulty  of  the  opera- 


INDUSTRIAL  GOVERNMENT  97 

tions  they  performed,  e.g.,  (i)  most  difficult,  (2) 
difficult,  (3)  medium,  and  (4)  simple.  After  apply- 
ing the  classification  in  a  few  of  the  departments,  the 
committee  decided  to  have  the  foremen  and  superin- 
tendents do  the  rest  of  the  classifying  of  employees, 
but  reserved  to  itself  the  right  to  review  individual 
classifications  upon  complaints  by  the  operators.  The 
committee  and  planning  board  reached  an  agreement 
also  that  any  person  who  is  changed  to  a  different  op- 
eration shall  receive  his  old  rates  for  three  days  after 
the  change. 

The  wage-rate  committee  submitted  the  new  rate 
schedules  and  agreements  to  the  house,  where  they 
were  adopted.  The  senate  gave  its  last  approval  to  a 
wage  bill,  and  the  rates  and  agreements  then  became 
effective. 

The  question  of  physical  examinations  for  new  em- 
ployees came  before  the  house  and  was  approved  in 
January,  1919.  The  fear  that  such  examinations  will 
become  an  economic  hindrance  to  those  found  defective 
seems  to  pass  away  as  employees  feel  themselves  strong 
enough  to  prevent  abuses.  Nothing  else  of  importance 
seems  to  have  been  done  by  the  house  during  the 
winter. 

THE  44-HOUR   WEEK 

The  spring  of  19 19  opened  with  the  44-hour  week 
as  the  major  issue.  The  Amalgamated  Garment 
Workers  of  Chicago  and  the  International  Ladies' 
Garment  Workers  of  New  York  had  won  easy  vic- 
tories, and  the  drive  for  the  shorter  week  was  on 
everywhere.     On  April  8,  19 19,  the  chairman  of  the 


98  INDUSTRIAL  GOVERNMENT 

house  appointed  a  special  committee  to  investigate  the 
problems  incident  to  introducing  the  shorter  week  in 
the  shop.  The  committee  was  ready  with  its  report 
the  following  week. 

The  report  emphasized  at  the  outset  that  reduction 
in  hours  should  not  be  permitted  to  result  in  reduced 
production.  Such  a  reduction,  if  it  should  occur 
through  the  whole  range  of  industry,  the  committee 
argued,  would  inevitably  be  a  factor  in  the  further 
advancement  of  prices,  the  final  outcome  of  which 
would  mean  a  virtual  reduction  of  income  to  the  work- 
ers as  the  result  of  the  shorter  hours  and  curtailed  pro- 
duction. Since  the  workers'  aspirations  for  higher 
standards  of  living  are  connected  with  efficient  pro- 
duction, and  also  with  the  prosperity  of  the  industry, 
the  report  emphasized  the  mutual  responsibility  of 
management  and  employees  for  the  improvement  of 
processes  and  the  reduction  of  costs.  The  most  im- 
portant of  the  recommendations  of  the  committee  may 
be  summed  up  as  follows : 

(a)  That  hours  be  reduced  from  48  to  44  without  diminu- 
tion in  pay. 

(b)  That  a  44-hour  committee  be  appointed  by  the  house 
to  see  that  the  rules  governing  the  introduction  of  the  44- 
hour  week  be  carried  out  and  that  employees  cooperate  in 
maintaining  the  previous  standard  of  production. 

(c)  That  there  be  no  work  on  Saturdays;  however,  opera- 
tors who  fall  below  the  permanent  standards  of  production 
may  be  required  to  work  on  Saturdays  at  the  regular  rates. 

(d)  Regular  overtime  to  all  those  who  work  on  Satur- 
days, except  those  mentioned  in  (c). 

The  recommendations  were  adopted  by  the  house 
and  approved  by  the  planning  board. 


INDUSTRIAL  GOVERNMENT  99 

The  good  results  of  the  cooperation  of  the  manage- 
ment and  44-hour  committee  in  the  introduction  of 
the  shorter  week  suggested  the  idea  of  having  a  sub- 
committee of  the  wage-rate  committee  meet  with  the 
heads  of  the  standards  department  and  note  the  meth- 
ods of  taking  time  studies  and  arriving  at  final  stand- 
ards, on  which  the  bonus  system  is  based.  With  this 
intimate  contact  the  house  is  able  to  take  more  effective 
action  on  bonus  questions  that  arise,  while  the  manage- 
ment, as  a  result  of  this  consultation  and  cooperation, 
is  enabled  to  introduce  its  standards  with  more  assur- 
ance of  success. 

REVISION  OF  BONUS  RATES 

In  the  meantime  the  union  renewed  its  attack  on  the 
company  and  the  "industrial  democracy."  The  bonus 
system  was  denounced  as  a  device  on  the  part  of  the 
capitalist  owners  to  speed  up  the  employees  for  the 
sake  of  profits,  and  the  employees  were  warned  that 
such  speeding  up  meant  premature  old  age  and  short- 
ened lives  for  them.  The  accusation  of  the  union  came 
in  for  considerable  discussion  at  the  next  meeting  and 
both  the  house  and  the  company  agreed  that  there 
should  be  an  investigation  to  settle  this  controversy  one 
way  or  the  other.  A  physiologist  from  Johns  Hop- 
kins was  engaged  to  come  and  make  the  investigation. 
Considerable  interest  was  manifested  in  the  shop  over 
this  investigation  and  the  subsequent  report.  Certain 
measures,  like  extension  of  the  medical  and  dental  serv- 
ice and  improved  equipments,  were  recommended  in 
the  report,  but  the  charge  that  the  bonus  system  was 
working  injury  to  health  and  shortening  the  lives  of 
employees  was  not  sustained. 


lOO  INDUSTRIAL  GOVERNMENT 

The  controversy  helped  to  bring  the  bonus  question 
again  to  the  forefront.  The  union  had  struck  at  the 
psychological  hour  when  the  company  was  revising  the 
wage  and  bonus  rates  to  conform  to  the  44-hour  agree- 
ment. In  the  hurried  recalculations  of  all  these  rates 
it  was  inevitable  that  errors  would  be  made.  Com- 
plaints about  the  bonuses  were  numerous  and  of  every 
description,  but  this  time  instead  of  taking  up  indi- 
vidual cases,  the  wage-rate  committee  went  to  the 
source  of  the  trouble  and  collaborated  with  the  plan- 
ning board  in  devising  a  schedule  that  would  be  more 
satisfactory. 

Under  the  agreement  there  was  to  be  no  reduction 
of  any  kind  in  weekly  rates  in  the  transition  to  the 
44-hour  week.  None  of  the  employees  were  willing 
to  take  a  penny  less.  This  temper  the  planning  board 
did  not  seem  to  appreciate  as  keenly  as  it  might  at 
first,  and  so  when  it  submitted  the  new  bonus  schedule 
providing  increases  for  the  first  three  classes  but  a 
reduction  of  4  cents  a  week  on  the  fourth-class  bonus, 
the  committee  promptly  returned  the  schedule  with  its 
disapproval.  The  planning  board  sent  back  word  that 
the  bonus  rates  would  be  "gone  over  again."  Four 
proposals  were  submitted  to  the  committee  at  its  next 
meeting.  In  all  four  proposals  the  second  and  third 
class  bonuses  were  the  same  amount.  The  alterna- 
tives lay  with  the  first  and  fourth  class  bonuses.  The 
first  two  proposals  offered  less  than  the  existing  weekly 
rate  for  the  fourth-class  bonus;  the  fourth  proposal 
offered  less  for  the  first-class  bonus.  The  committee 
chose  the  third  proposal,  which  provided  increases  for 
the  first,  second,  and  third  class  bonuses,  and  the  ex- 
isting rate  for  the  fourth  class.     Obviously,  the  com- 


INDUSTRIAL  GOVERNMENT  loi 

mittee  acted  upon  the  principle  of  the  greatest  good 
to  the  greatest  number. 

The  old  and  new  bonus  rates  stood  as  follows :  Old 
bonus,  48-hour  week:  First  class,  $1.92;  second  class, 
$2.88;  third  class,  $4.32;  fourth  class,  $5.76;  new 
bonus,  44-hour  week:  First  class,  $2.20;  second  class, 
$3.08;  third  class,  $4.40;  fourth  class,  $5.76. 

This  settled  the  production  bonuses.  But  on  the 
heels  of  this  settlement  the  management  came  forward 
with  another  bonus  proposal — a  service  bonus.  It  was 
to  be  based  on  the  length  of  continuous  service  with 
the  company.  The  wage-rate  committee  was  asked  to 
prepare  the  new  schedule  of  rates.  After  two  weeks' 
consideration  the  committee  submitted  the  following 
schedule,  which  was  approved  by  the  management: 

Weekly 
bonus. 

3  to  5  years  of  continuous  service $0.50 

5  to  10  years  of  continuous  service I.oo 

10  to  15  years  of  continuous  service 2.00 

15  years  and  up  of  continuous  service 3.00 

When  these  new  schedules  had  been  approved  by  the 
house  they  were  posted  in  the  shop,  as  is  the  custom. 
The  employees  were  then  able  to  figure  out  to  what 
their  service  and  production  bonuses  would  amount. 
Some  of  the  workers  who  were  certain  that  they  were 
going  to  get  service  bonuses  were  disappointed  and 
complained  to  the  committee.  The  committee  began 
an  investigation  and  found  out  that  the  difficulty  had 
its  source  in  the  strikes  of  191 1  and  1918.  The  com- 
pany took  the  position  that  those  who  struck  had  termi- 
nated their  service  records  at  that  point  and  that  when 
they  came  back  their  period  of  service  began  anew. 


I02  INDUSTRIAL  GOVERNMENT 

The  committee  was  made  the  arbiter  of  the  case. 
The  question  was,  Did  these  strikes  interrupt  the  con- 
tinuous-service records  of  the  strikers?  Each  side  pre- 
sented its  contentions.  The  committee's  decision  sus- 
tained the  company.  The  committee  then  requested 
that  the  service  records  of  all  employees  be  put  at  its 
disposal  for  investigating  further  grievances  that  might 
arise  under  this  bonus. 

ADJUSTMENT   OF   MISCELLANEOUS   COMPLAINTS 

With  the  bonus  question  practically  settled  for  the 
time,  the  committee  turned  to  the  numerous  complaints 
that  had  accumulated  respecting  wage  rates  and  time 
studies.  Profiting  by  its  experience,  the  committee  de- 
cided to  waive  individual  cases  and  have  each  depart- 
ment prepare  a  list  of  all  its  grievances.  The  oppor- 
tunity seems  to  have  appealed  to  several  of  the  de- 
partments, as  they  submitted  long  bills  of  particulars. 
Some  of  the  lists  contained  from  35  to  40  grievances. 
What  appear  to  be  the  10  leading  grievances  are  noted : 

1.  Wages  too  low. 

2.  Standards  too  high;  too  few  workers  measure  up  to 
them,  and  consequently  bonuses  are  difficult  to  earn. 

3.  Lack  of  uniformity  in  wages. 

4.  Bonuses  are  lost  whenever  new  operators  come  in  with 
changing  styles. 

5.  Work  not  ready  when  workers  call  for  it. 

6.  No  time  allowance  for  heavier  garments. 

7.  Too  long  delays  in  attending  to  complaints. 

8.  Long  delays   at   route   boards. 

9.  Time  allowances  insufficient. 

10.  Losses  in  both  wages  and  bonuses  from  transfers  from 

one  operation  to  another. 


INDUSTRIAL  GOVERNMENT  103 

The  committee  then  hit  upon  the  idea  of  sending 
these  bills  of  complaints  to  the  management.  This 
served  to  give  the  committee  both  sides  of  the  contro- 
versy and,  at  the  same  time,  to  introduce  the  manage- 
ment to  conditions  and  opinions  in  the  departments. 
The  management  promptly  replied  with  great  detail. 
Many  of  the  complaints  were  frankly  acknowledged  as 
valid  and  remediable,  and  promises  were  given  that 
the  causes  for  same  would  be  removed  and  the  existing 
grievances  adjusted.  Detailed  explanation  of  the  poli- 
cies of  the  company  smoothed  out  other  grievances 
and  showed  that  still  others  were  unavoidable  under 
the  conditions  and  limitations  of  the  industry.  In 
the  case  of  the  long  bill  of  grievances,  the  committee 
accepted  in  toto  the  management's  response. 

FURTHER  REVISION  OF  WAGE  RATES 

With  the  situation  thus  clarified  and  simplified  the 
committee  began  the  task  of  revising  the  rates.  The 
workers  were  classified  on  the  basis  of  "operations  in 
the  departments."  Four  classes  were  formed,  named 
in  a  descending  scale  of  difficulty,  A,  B,  C,  and  D. 

On  July  15,  19 19,  the  revised  schedule  of  rates  for 
women  and  girls  was  submitted  to  the  house  and  made 
known  among  the  employees  affected.  Dissatisfaction 
developed  and  the  committee  reconsidered  its  action. 
The  second  schedule  showed  many  revisions  in  favor 
of  employees,  ranging  from  a  few  cents  to  $1.50  per 
week.  A  comparison  of  this  with  the  preceding  Octo- 
ber's schedule  shows  increases  ranging  from  $3  to  $4 
per  week. 

At  the  conclusion  of  its  session  on  July  15,  1919,  the 


I04  INDUSTRIAL  GOVERNMENT 

committee  notified  the  fiinishers,  cutters,  estimators, 
and  sample  tailors  to  have  their  representatives  on 
hand  the  next  day  to  present  their  cases.  July  i6  was 
a  lively  day.  It  was  men's  day.  Representatives 
from  all  the  departments  invited  were  before  the  com- 
mittee with  their  "kicks,"  with  their  "facts  and  fig- 
ures," with  "proofs"  and  "arguments"  on  their  need 
of  higher  wages.  There  was  competition  among  the 
departments  for  the  higher  rating  and  higher  rates, 
and  some  evidences  of  jealousy.  The  cutters  led  off 
with  the  statement  that  they  were  getting  the  worst  of 
it  all  round.  One  of  their  representatives  said :  "We 
have  everything  to  lose  and  nothing  to  gain."  The 
cutters  were  the  most  skilled  and  valuable  workers  in 
the  shop,  he  said,  but  there  was  no  recognition  of  it  in 
the  pay  envelope.  The  representative  of  the  esti- 
mators entirely  disagreed  with  that.  He  wanted  to 
know,  if  cutting  was  such  a  highly  technical  and  skilled 
operation,  why  the  cutters  were  always  so  anxious  to 
get  back  to  cutting  again  when  they  were  transferred 
to  the  estimators'  department?  The  estimators  were 
the  real  people  of  the  shop  and  deserved  the  higher 
rating,  he  concluded.  Then  came  the  representative 
of  the  sample  tailors  who  affirmed  that  his  department 
contained  the  real  skill  of  the  shop.  The  fact  that  the 
sample  tailors  had  to  make  the  whole  garment  and 
make  it  right  proved  that  their  work  was  the  most 
exacting  and  the  most  valuable.  See  what  losses  the 
company  would  suffer  if  it  were  not  for  the  great  skill 
of  the  sample  tailors.  This  was  too  much  for  the 
estimators  whose  representative  interrupted  to  point 
out  what  great  losses  the  firm  would  suffer  if  they 
should  make  miscalculations.     And  so  it  went  back 


INDUSTRIAL  GOVERNMENT  105 

and  forth  that  day,  a  striking  picture  of  group  strug- 
gle within  the  ranks  of  the  proletariat  itself. 

After  these  representatives  had  presented  the  re- 
spective cases  (and  judgments),  the  committee  ex- 
cused them  and  called  in  representatives  of  the  com- 
pany to  get  the  management's  rating  of  these  depart- 
ments as  to  skill.  The  committee  was  in  doubt  about 
the  comparative  skill  of  cutters  and  estimators,  and 
questioned  very  closely  the  company  officials  on  this 
point.  The  conclusion  reached  by  the  committee  was 
that  cutters  and  estimators  were  equally  skilled  and 
rated  them  so.  The  committee  was  inclined  to  rate 
the  pressers  slightly  lower  than  the  cutters,  but  as  the 
company  had  been  paying  the  same  rates  for  both, 
that  rating  was  not  disturbed. 

The  wage  schedules  and  recommendations  of  the 
wage  rate  committee  were  submitted  to  the  house  of 
representatives,  which  approved  them.  The  manage- 
ment then  gave  its  approval,  and  the  new  wage  rates 
went  into  effect  on  July  23,  1919. 

ALLOWANCES  FOR  LEARNING  TIME 

There  remained  the  question  of  "allowances  for 
learning  time."  When  new  operations  are  introduced, 
the  question  arises  as  to  who  shall  pay  for  the  time 
necessary  to  learn  the  new  operation  and  as  to  how 
much  time  shall  be  allowed.  There  was  some  dissat- 
isfaction with  the  existing  time  allowances,  so  the  wage 
rate  committee  set  out  to  prepare  a  definite  schedule 
of  "learning  time"  for  the  various  kinds  of  operations. 

The  committee  developed  a  schedule  through  actual 
tests  in  one  department,  and  then  tried  its  schedule  in 


io6  INDUSTRIAL  GOVERNMENT 

the  other  departments.  When  the  schedule  had  been 
proved  by  tests,  the  committee  and  management  em- 
bodied it  in  the  following  agreement : 

1.  Three  times  standard  operation  for  the  first  day,  two 
times  the  second  day,  and  one  and  one-half  the  third  day, 
when  an  employee  is  given  a  new  operation. 

2.  Twice  the  standard  time  is  allowed  when,  after  lo 
days  or  more,  an  operator  is  transferred  back  to  former 
operation. 

3.  Operators  transferred  to  lower  grade  of  work  are  to 
be  given  one  day  to  come  up  to  normal.  Twice  the  standard 
time  is  allowed  for  this  day. 

4.  No  learning  time  is  to  be  allowed  when  the  new  opera- 
tion requires  less  work  or  is  easier  than  the  operation  it 
displaces,  nor  when  new  styles  require  same  operation  as  in 
vogue. 

5.  Operators  able  to  perform,  in  standard  time,  those  new 
operations  for  which  learning  time  is  allowed  are  to  receive 
5  cents  an  hour  in  lieu  of  learning  time  allowance. 

This  agreement  was  sanctioned  by  the  house  and  by 
the  planning  board. 

The  records  of  the  house  show  a  great  falling  off 
in  the  number  of  complaints  after  these  several  sched- 
ules went  into  effect.  The  wage-rate  committee  had 
met  the  problems  and,  on  the  whole,  satisfactorily  dis- 
posed of  them. 

EMPLOYEES  DESIRE  A   "hAND"   AS  WELL  AS  A  "vOICE" 
IN    MANAGEMENT 

This  shop  organization  was  constructed  upon  the 
theory  that  what  employees  desire  is  a  "voice"  in  their 
own  affairs,  a  chance  to  "talk"  and  "air"  their  griev- 
ances.    The  house  of   representatives  was   designed 


INDUSTRIAL  GOVERNMENT  iojr 

particularly  to  serve  this  purpose.  But  a  study  of  the 
records  of  these  two  years  shows  clearly  that  this  group 
of  employees  desire  a  "hand"  in  their  own  affairs  as 
well  as  a  "voice," 

Throughout  the  whole  process  of  changes  that  have 
been  passed  in  review  there  has  been  a  progressively 
increasing  participation  by  the  employees  in  the  mak- 
ing of  policies  and  decisions  that  vitally  concern  them. 
The  establishment  of  a  wage-rate  committee  marked 
the  triumph  of  collective  bargaining  over  the  earlier 
policy  of  a  collective  economy  dividend.  With  the 
passing  of  the  senate,  the  house  of  representatives  com- 
pleted its  evolution  from  a  house  of  suggestion  to  a 
house  of  legislation.  To-day  the  president  of  the 
house  is  a  member  of  the  planning  board.  In  noting 
this  gradual  increase  in  the  power  and  responsibilities 
of  the  employees,  it  should  be  remarked  that  the  man- 
agement has  welcomed  and  encouraged  this  develop- 
ment. 

The  growing  power  of  the  employees  is  revealed, 
again  in  the  matter  of  discharges.  When  the  case  be- 
fore the  War  Labor  Board  was  pending  the  company 
agreed  with  the  house  not  to  discharge  employees  there- 
after without  first  consulting  the  latter.  Since  then  the 
management  and  house  have  adopted  a  set  of  rules 
prescribing  the  offenses  that  justify  discharges.  Now 
when  the  company  wishes  to  discharge  an  employee  it 
must  go  before  the  betterment  committee  (a  standing 
committee  of  the  house)  and  prove  that  the  employee 
is  guilty  of  one  of  these  offenses.  This  committee 
is  the  jury  in  the  case  and  decides  the  facts.  The  com- 
pany must  drop  the  action  for  discharge  if  the  com- 


io8  INDUSTRIAL  GOVERNMENT 

mittee  decides  that  the  case  has  not  been  proved.  But 
if  the  company  wins,  the  employee  may  appeal  to  the 
board  of  review,  upon  which  the  house  and  manage- 
ment have  equal  voting  power. 

The  necessities  for  prompt  action  in  this  clothing 
shop  soon  demonstrated  the  cumbersomeness  of  the 
machinery  and  methods  borrowed  from  our  Federal 
Government.  Yet  it  should  be  recalled  that  the  Leitch 
plan,  while  having  the  form  of  the  United  States  Gov- 
ernment, does  not  embody  all  its  principles  of  repre- 
sentation. The  changes  that  have  augmented  the 
power  of  the  employees  have  been,  at  the  same  time, 
in  the  direction  of  direct  and  continuous  contact  of 
management  and  people.  The  legislative  policy  is  still 
adhered  to,  but  joint  conferences  precede  legislative 
action.  Legislative  action  becomes  more  a  matter  of 
ratification  under  this  arrangement,  although  the  house 
has  the  right  to  proceed  independently. 

This  method  of  shop  direction  is  proving  a  great 
school  of  experience  for  the  employees,  and  for  the 
management  also.  There  is  no  denying  the  fact  that 
this  organization  has  to  its  credit  a  record  of  substan- 
tial achievement  and  that  it  is  entitled  to  distinction 
among  those  introducing  popular  government  in  in- 
dustry. 

Appendix 

The  following  table  gives  the  rates  for  male  and 
female  workers,  effective  July  23,  1919,  the  old  rates, 
and  the  rates  paid  for  similar  work  in  the  same  city : 


INDUSTRIAL  GOVERNMENT 


109 


OLD    AND    NEW    WAGE    RATES    COMPARED    WITH    RATES 
PAID  FOR  SIMILAR  WORK  IN  SAME  CITY  UNDER  WAR 


LABOR  BOARD  AWARD. 


Operation. 


Grade. 


MALES 
Old  rate. 


New  rate 


Pressing  and  finishing A 

B 
C 

Fore  and  machine A 

B 
C 

Operating: 

Full  skilled A 

B 

Semiskilled A 

B 

Cutting A 

B 


Hour. 

$0.73 
•  71 
.65^ 
.6554 
.60 
.5454 

.65/2 


•73 


Week.    Hour. 


$3212 

$0.85 

31-24 
28.82 
28.82 

26.40 

2398 

■  79y2 

•73 

•73 

.68 

.63 

28.82 

.82 

32.12 

•  77>^ 
.69  ^ 
.61  J4 
.8S 

Weekly 
rates 
under 
War 


Labor 
Board 
Week,     award. 


$37-40 
34-98 
32.12 
32.12 
29-92 
27.72 

36.08 
34.10 
30.36 
27.06 
37-40 


Estimating A         .79  34-76  '.91 

Pattern  grading A          .79  34-76  *.9i 

Sample  tailoring A         .655^  28.82  .82 

Minor  operations ....  .57 

FEMALES 

Machine  operating A     $0.48  $21.12  $0.57 

Do B         .425^  18.70  .siVa 

Do C         .sS'A  16.94  -37^^ 

Do D         .35  15.40  .42 

Handwork A         .46  20.24  -55 

Basting  lining A          .43/^  19-J4  -53 

Do B         .405^  17-82  .47}^ 

Do C         .37  16.28  .44 

Felling  lining A         .35  i5-40  .42 

Do B         .31  13-64  .38^^ 

Tacking A         .35  15.40  .42 

Do B         .31  13-64  -38^ 

Button  sewing  (machine) . .,         A         .35  15.40  .42 

Button  sewing  (hand) ....          .31  13-64  -38^^ 

Cleaning ....          .27^  12.10  .32 

Bench  work  (pin) A          .29^  12.98  .35 

Do B         .27^  12.10  .32 

Marking A         .291/2  12.98  .35 

Do B         -271/2  12.10  .32 

Cutting,  assemblers' \                        .,  „ 

Pin-ticketers  fitters' / 34/2  i5-i8  .42 

Pressing — parts A         .41}^  18.26  .57 

Do B         .49  21.56  .53 

Do C         .41^2  18.26  .47^3 

MINIMA   ON    ALL   OPERATIONS 

First  three  months $0.27^^  $12.10  $0.32 

Second  three  months 3'  13-64  -35 

Third  three  months 38Y2 

Fourth  three  months 35  15-40  .42 

•  Includes  6  cents  bonus. 


$3500 
34.00 
31.00 
30.00 
28.00 


40.04 

•40.04 

36.08 

25.08 


$25.08 
22.66 
20.90 
18.48 
24.20 
23-32 
20.90 
19.36 
18.48 
16.94 
18.48 
16.94 
18.48 
16.94 
14.08 
15.40 
14.08 
15.40 
14.08 

18.48 

2508 
23-32 
20.90 


36.00 
34-00 
30.00 
27.00 
37.00 
35-00 
33-00 
29.00 
25.00 
2300 
38.00 
38.00 
34-00 
25.00 


$25.00 
24.00 
20.00 
18.00 
23.00 

20.00 

18.50 
17.00 
18.50 
17.00 
18.50 
17.00 


23.00 
20.00 


$14.08  $12.00 

15.40  14.00 

16.94  lS-50 

18.48  17.00 


X 

A  SHOP  COMMITTEE  THAT  FAILED 

In  July,  19 19,  at  the  headquarters  of  local  ma- 
chinists' unions  in  many  large  cities  was  a  conspicuous 
poster  commanding  machinists  to  stay  away  from  a 
certain  firm  in  a  large  city.  The  company  was  "un- 
fair" to  organized  labor,  and  a  strike  was  on  for  union 
recognition  and  standards. 

This  company  had  installed  an  employees'  represen- 
tation plan.  It  had  every  evidence  of  manifest  good 
faith.  Many  of  the  plans  embody  reservations  of  au- 
thority in  favor  of  the  company.  One  plan  enu- 
merates over  twenty  such  reservations.  This  firm 
made  no  reservations  whatever.  There  were  no  high- 
sounding  phrases.  The  purpose  was  stated  in  a  sen- 
tence :  "to  give  the  employees  a  voice  in  the  conditions 
under  which  they  labor,  and  to  provide  an  orderly 
procedure  for  adjustments  of  possible  differences." 
The  plan  was  simple,  short,  flexible.  "Nominations 
and  elections  shall  be  conducted  by  the  employees  them- 
selves." The  elections  were  held  frequently  and  em- 
ployees had  the  right  to  recall  an  unsatisfactory  rep- 
resentative. With  respect  to  the  freedom  of  the  rep- 
resentative, "It  is  understood  and  agreed  that  each 
representative  shall  be  free  to  discharge  his  duties  in 
an  independent  manner  without  fear  that  his  individ- 
ual relations  with  the  company  may  be  affected  in  the 

no 


A  SHOP  COMMITTEE  THAT  FAILED    in 

least  degree  by  any  action  taken  by  him  in  good  faith 
in  his  representative  capacity.  To  insure  each  rep- 
resentative his  right  to  such  independent  action,  he 
shall  have  the  right  to  take  the  question  of  an  alleged 
personal  discrimination  against  him,  on  account  of  his 
acts  in  his  representative  capacity  to  any  of  the  supe- 
rior officers,  to  the  General  Joint  Committee,  and  to 
the  General  Manager  of  the  Company."  Elsewhere 
the  plan  provides  for  arbitration  when  the  General 
Manager  and  the  General  Joint  Committee  fail  to 
agree. 

The  strike  had  followed  soon  after  the  introduction 
of  the  representation  plan.  What  was  the  difficulty? 
Had  this  firm,  with  all  its  seeming  good  faith,  really 
tried  to  "put  one  over"  on  the  employees?  And  had 
the  watchful  unions  caught  it  in  the  act?  We  were 
ushered  into  the  office  and  introduced  to  the  Industrial 
Representative.  He  made  a  few  inquiries.  He  re- 
lated the  whole  history  of  the  representation  plan.  He 
was  critical  of  himself,  charitable  toward  the  unions 
that  had  opposed  and  overthrown  it.  He  had  read  a 
magazine  article  by  John  Leitch,  the  Industrial  Evan- 
gelist. It  put  him  to  thinking.  The  more  he  thought 
about  it,  the  more  compelling  became  the  logic  of  In- 
dustrial Democracy.  He  began  agitating  in  the  inner 
councils  of  the  company  and  succeeded  in  "selling"  the 
idea.  He  was  appointed  Industrial  Representative  to 
help  create  and  deal  with  the  democracy  that  was  to 
come  into  this  shop. 

He  informed  the  employees  of  the  decision  to  intro- 
duce employees'  representation.  His  business  experi- 
ence had  made  him  a  pragmatist,  to  whom  a  good  thing 
is  the  thing  that  works  well.     He  selected  a  committee 


112  INDUSTRIAL  GOVERNMENT 

to  visit  the  several  types  of  Committee  plans  and  ob- 
serve the  success  they  were  attaining.  After  this  com- 
mittee had  concluded  its  itinerary  it  submitted  its  ob- 
servations to  the  Industrial  Representative,  and  was 
discharged.  He  now  appointed  a  second  committee  to 
draft  a  plan  for  the  works.  This  committee  drafted 
such  a  plan  as  seemed  best  adapted  to  this  shop,  while, 
at  the  same  time,  squaring  with  the  observations  of 
the  first  committee  respecting  the  successful  experience 
elsewhere.  On  both  of  these  committees  the  employees 
had  their  quota  of  members.  The  principles  of  "Jus- 
tice" and  "Cooperation"  had  been  observed. 

The  plan  worked  out  was  democratic.  All  em- 
ployees eighteen  years  of  age  and  over  who  had  been 
on  the  pay  roll  sixty  days  or  longer  were  made  eligible 
to  vote.  The  factory  was  to  be  divided  into  voting 
precincts  having  from  fifty  to  sixty  workers  each,  and 
the  workers  in  each  of  these  precincts  elected  a  com- 
mittee to  conduct  the  first  election  in  the  precinct. 
Subsequent  elections  were  to  be  conducted  by  a  gen- 
eral committee  of  five  employee  representatives,  the 
Committee  on  Rules.  This  committee  had  power, 
also,  to  readjust  the  voting  units.  The  employees 
were  put  in  full  control  of  their  own  elections. 

An  election  was  now  held  to  approve  or  reject  the 
plan.  Ninety-six  per  cent  of  the  employees  partici- 
pated, and  a  majority  voted  for  adoption. 

The  election  of  representatives  and  the  organization 
of  the  shop  committees  followed.  American  citizens 
twenty-one  years  of  age  and  over  with  a  year's  service 
record  were  eligible  for  election.  No  company  execu- 
tive, however,  from  the  rank  of  assistant  foreman  on 
up  could  be  chosen  to  represent  employees.     The  f  ram- 


A  SHOP  COMMITTEE  THAT  FAILED    113 

ers  made  sure  that  there  would  be  no  bosses  represent- 
ing the  workers.  Thirty-seven  representatives  were 
elected,  one-half  for  the  full  term  of  one  year,  the 
other  half  for  the  intervening  period  until  the  next 
regular  semi-annual  election.  After  each  such  elec- 
tion the  representatives  for  the  employees  were  to  meet 
and  reorganize.  This  was  intended  to  make  the  or- 
ganization expressive  of  the  popular  will  at  all  times. 
This  representative  body  did  not  function  as  a  con- 
gress, but  through  various  committees  of  its  own  choos- 
ing. Particular  pains  seems  to  have  been  taken  to 
see  to  it  that  employee  participation  would  not  be  lim- 
ited to  minor  and  inconsequential  matters  as  regards 
the  workers'  interests.  The  roster  of  committees  here 
copied  from  the  plan  shows  the  wide  extent  of  their 
participation  in  shop  affairs. 

Wage  Committee:  Rates,  Bonus,  Piece  Work,  and  Fac- 
tory Working  Hours. 

Education  Committee:  Schools,  Americanization,  and  Up- 
grading of  Employees. 

Employment  Committee:  Medical  Relief,  Insurance, 
Home  Conditions,   and   Pensions. 

Working  Conditions:  Sanitation,  Safety,  Factory  Equip- 
ment, Plant  Alteration,  and  Employees'  Surroundings. 

Production  Methods:  Improving  Product,  Improving 
Quality,  Improving  Design,  and  Reducing  Scrap. 

Recreation  Committee :  Athletics,  Amusements,  Commis- 
sary (including  restaurant),  and  All  Cooperative  Activities. 

General  Committee :  to  consider  all  matters  not  falling 
within  the  scope  of  any  other  committees  herein  provided 
for. 

Rules  Committee:   To  direct  elections. 

The  employee  representatives  chose  five  of  their 
number  for  each  of  these  committees.     E^ch  commit- 


114  INDUSTRIAL  GOVERNMENT 

tee  of  employees  held  a  regular  meeting  every  two 
months.  On  alternate  months  each  met  with  a  like 
committee  representing  the  company.  The  two  com- 
mittees were  called  a  Joint  Committee  when  meeting 
together. 

By  this  arrangement  the  employee  representatives 
were  given  an  opportunity  to  have  their  own  meetings 
and  to  decide  upon  their  line  of  action  before  facing 
the  company's  representatives.  Joint  shop  committee 
systems  have  been  criticized  for  providing  no  adequate 
and  effective  means  for  independent  action  and  for  the 
rights  of  free  speech  and  association  on  the  part  of  the 
employee  representatives.  Employee  committeemen 
have  been  deterred  from  taking  the  initiative  in  ar- 
ranging meetings  of  their  own  when  not  provided  for, 
so  it  has  been  charged,  by  the  fear  that  some  company 
"spotter"  on  the  committee  would  report  the  proceed- 
ings to  the  officials,  who  in  turn  would  "fire"  the  lead- 
ers. Not  only  did  the  plan  throw  safeguards  about 
the  free  action  of  the  employee  representatives,  but 
provision  was  made  that  no  financial  sacrifices  were  en- 
tailed in  the  discharge  of  committee  functions.  "For 
time  necessarily  occupied  in  actual  attendance  at  regu- 
lar meetings  or  at  special  meetings  of  conferences 
jointly  approved  (by  Industrial  Representative  and 
Chairman  of  Employees'  Representatives),  representa- 
tives shall  receive  from  the  company  payment  com- 
mensurate with  their  average  earnings." 

There  were  already  hundreds  of  union  men  in  the 
plant  and  a  move  was  in  preparation  to  push  the  work 
of  organization  and  secure  recognition.  No  sooner 
had  the  company  announced  its  new  policy  than  the 
trade  union  leaders  began  observing  closely  the  course 


A  SHOP  COMMITTEE  THAT  FAILED    115 

of  events.  A  "company  union"  is  a  red  flag  to  the 
American  Federation  of  Labor  trade  unionists.  "The 
company  is  trying  to  Rockefellerize  the  works,"  de- 
clared the  watchful  unionist.  Organized  labor  looks 
upon  such  moves  on  the  part  of  employers  as  strategy 
in  the  game  of  economic  warfare.  To  the  local  lead- 
ers this  movement  that  the  company  saw  the  hand- 
writing of  Trade  Unionism  on  the  wall  and  was  now 
paying  hypocritical  homage  to  the  principle  of  collec- 
tive bargaining  by  setting  up  a  union  of  its  own.  It 
was  all  a  scheme  on  the  company's  part  to  deceive  the 
workers  and  put  off  the  final  triumph  of  the  bona  fide 
unions.  It  makes  the  organizer  and  agitator  grit  his 
teeth  when  he  has  to  stand  by  and  witness  the  birth  of 
a  bastard  company  union. 

The  company  had  neglected  too  long  its  labor  pol- 
icy. The  trade  unions  were  on  the  ground  and  were 
determined  not  to  be  brushed  aside.  A  bitter  strug- 
gle for  the  control  of  the  labor  force  was  inevitable. 

The  unions,  evidently,  thought  that  there  was  a  pos- 
sibility of  their  getting  control  of  the  committees,  and 
planned  to  this  end.  But  they  elected  only  eleven  out 
of  the  thirty-seven.  They  were  thus  in  a  minority, 
and  considered  that  the  company  was  in  control  and 
that  the  cards  were  stacked  against  them  in  the  repre- 
sentative body. 

When  the  shop  committees  were  organized,  the  com- 
pany, as  an  earnest  of  its  good  faith,  voluntarily  re- 
duced the  hours  from  fifty  to  forty-eight  per  week. 
There  was  a  general  sentiment  for  a  revision  of  the 
wage  rates  and  the  Wage  Rate  Committee  at  once 
began  the  task.  The  investigation  was  carried  to  every 
department  of  the  works,  hearings  for  the  workers 


ii6  INDUSTRIAL  GOVERNMENT 

were  held,  living  costs  were  compared  with  former 
years,  and  a  new  schedule  prepared.  The  committee 
then  asked  for  a  meeting  with  the  Industrial  Repre- 
sentative to  present  its  demands.  But  in  the  meantime 
the  Industrial  Representative  had  conducted  an  in- 
vestigation on  the  quiet  and  prepared  a  revised  wage 
schedule  which  the  company  would  be  willing  to  ac- 
cept. 

The  meeting  was  promptly  arranged  and  the  de- 
mands presented.  The  Industrial  Representative 
waited  until  the  committee  had  presented  its  demands 
in  full  and  then  he  presented  the  schedule  which  had 
been  prepared  under  his  direction.  The  surprising 
thing  about  his  schedule  was  that  its  rates  were  much 
in  advance  of  what  the  committee  had  demanded.  The 
committee  was  rather  nonplussed,  but  soon  recovered 
and  voted  to  accept  the  company's  proposition  in  pref- 
erence to  its  own. 

One  would  naturally  infer  that  this  incident  would 
have  strengthened  the  company  with  the  employees  and 
would  have  been  convincing  proof  of  its  good  faith. 
The  result  was  just  the  contrary.  The  unionists 
pointed  to  it  as  proof  that  the  company  knew  it  was 
whipped  and  was  ■falling  over  itself  to  make  any  kind 
of  a  peace  that  excluded  union  recognition;  as  proof, 
again,  of  their  contention  that  committees  under  such 
a  plan  had  more  regard  for  the  firm  than  for  the  work- 
ers they  were  supposed  to  represent.  The  wage-rate 
committee  was  thoroughly  discredited. 

While  this  was  transpiring  the  worst  agitator  in  the 
shop  was  caught  mutilating  his  time  card.  Under  the 
standing  rules  of  the  company  such  an  offense  was 
grounds  for  instant  and  unconditional  discharge.     No 


A  SHOP  COMMITTEE  THAT  FAILED    117 

doubt  it  was  intended  as  a  direct  challenge  to  the  com- 
pany "to  start  something."  The  agitator  frankly  ad- 
mitted his  guilt,  but  stated  that  many  other  workers 
were  doing  the  same  thing  and  that  if  the  firm  "canned" 
him  he  and  his  fellow  trade  unionists  would  have  to 
consider  such  action  as  intentionally  discriminatory. 

In  former  days  the  agitator  would  have  been  fired 
without  even  ceremony.  But  the  Management  had 
just  announced  its  conversion  to  the  principles  of  In- 
dustrial Democracy,  and  to  have  fired  this  unionist 
would  have  given  the  unions  just  the  club  they  wanted. 
The  Industrial  Representative,  however,  was  anxious 
that  there  should  be  no  occurrences  that  would  in  the 
least  reflect  on  the  good  faith  of  the  firm.  He  per- 
ceived at  once  that  this  was  a  very  ticklish  situation, 
to  mishandle  which  would  threaten  the  success  of  the 
plan  from  the  very  outstart.  He  had  become  aware 
of  the  strength  of  the  unions  in  the  shop,  and  he  knew 
that  to  fire  this  man  would,  under  the  strained  situa- 
tion, appear  to  unionists  as  prima  facie  evidence  of 
the  hostility  of  the  firm  to  them.  So  he  merely  sus- 
pended the  agitator  and  turned  the  case  over  to  a  com- 
mittee of  employees'  representatives.  This  committee 
was  to  learn  whether  the  charges  of  the  agitator  were 
true  that  mutilation  of  time  cards  was  a  common  oc- 
currence. 

Had  the  suspended  agitator  so  desired,  he  could 
have  appealed  his  case  for  adjustment.  Under  the 
plan  adopted  he,  or  his  representative  for  him,  could 
have  gone  to  one  of  the  superior  officers  of  the  com- 
pany, and  failing  to  get  satisfaction  there,  could  have 
appealed  to  the  General  Committee  of  Appeals.  "The 
General  Joint  Committee  on  Appeals  shall  consider 


ii8  INDUSTRIAL  GOVERNMENT 

any  such  matter  with  reasonable  promptness,  at  a  reg- 
ular or  special  meeting,  and  may  adopt  such  means  as 
are  necessary  to  ascertain  the  facts  and  effect  a  set- 
tlement," read  the  plan.  Failing  to  arrive  at  a  set- 
tlement here,  recourse  to  arbitration  was  finally  pro- 
vided for. 

However  crooked  the  agitator  may  have  been  in  his 
dealing  with  the  company,  he  was  absolutely  four- 
square on  his  union  principles.  He  refused  to  recog- 
nize the  plan  even  to  the  extent  of  using  its  adjustment 
machinery.  He  made  the  management  face  the  naked 
situation. 

In  the  course  of  its  investigation  the  committee 
found  that  the  agitator's  charges  were  true.  There 
were  numerous  cases  of  mutilation  that  had  been  slip- 
ping through  undetected.  The  company  was  strictly 
up  against  it.  If  the  agitator  was  now  discharged, 
consistency  would  compel  the  discharge  of  scores  of 
employees.  The  management  was  caught  between  the 
horns  of  a  dilemma,  the  Trade  Unions  on  one  side  and 
shop  discipline  on  the  other  side.  The  agitator  was 
reinstated. 

For  these  endeavors  at  liberality  and  fairness  the 
company  received  no  credit  from  the  union  leaders. 
The  reinstatement  of  the  agitator  was  to  them  but  an- 
other sign  of  wavering  and  weakness  in  the  councils 
of  the  management.  They  decided  the  time  was  ripe 
for  a  show-down.  They  informed  the  Industrial  Rep- 
resentative that  they  could  no  longer  recognize  the 
representative  body  as  bona  fide  and  asked  the  company 
to  annul  the  recent  elections.  The  management  re- 
plied that  the  present  representative  body  was  prop- 
erly representative,  that  it  had  been  duly  elected  in 


A  SHOP  COMMITTEE  THAT  FAILED    119 

free  elections  controlled  by  the  workers  themselves,  that 
the  company  felt  itself  obligated  by  the  plan  adopted 
by  both  sides  and  must  insist  that  all  questions  re- 
quiring adjustment  be  submitted  to  the  committees  au- 
thorized to  settle  such  matters. 

When  the  company  took  this  position  the  eleven 
union  representatives  promptly  resigned. 

Mass  meetings  for  the  union  employees  were  held 
in  the  trade  union  halls,  where  about  forty  committee- 
men all  told  were  elected  to  constitute  the  new  Trade 
Union  shop  committee  in  this  factory.  At  the  same 
time  an  effort  was  being  made  in  the  shop  to  fill  the 
vacancies  made  by  the  resignation  of  the  eleven  union 
representatives.  Eight  of  the  vacancies  were  filled,  but 
in  three  departments  the  unions  were  solidly  organ- 
ized and  refused  to  have  any  more  elections  in  the 
shop.  So  there  were  three  vacancies  in  the  repre- 
sentative body. 

The  unions  formally  demanded  the  recognition  of 
the  all-union  committee  as  the  representative  body  of 
the  employees.  The  management  declined.  A  strike 
was  called.  Eighty  per  cent  of  the  employees  walked 
out. 

Then  followed  one  of  the  bitterest  labor  struggles 
in  that  city.  Many  of  those  who  l"ad  walked  out  soon 
after  returned,  but  there  were  many  others,  among 
them  the  best  of  the  mechanics,  who  never  returned. 
Both  company  and  unions  suffered  heavily  in  this  strug- 
gle. 

When  the  strike  was  at  its  height,  the  Industrial 
Representative  called  into  his  office  the  remnant  of  the 
employees'  representatives  to  tell  them  that  the  rep- 
resentation plan  was  at  an  end  in  this  plant.     The 


I20  INDUSTRIAL  GOVERNMENT 

unions  had  killed  it.  Only  four  hundred  workers  had 
remained  loyal.  The  strikers  who  returned,  as  well 
as  the  recruits,  were  new  employees.  The  old  gov- 
ernment could  not  be  reconstructed,  for  the  plan  re- 
quired sixty  days'  service  as  a  requisite  for  voting 
and  one  year's  service  for  election  as  representative. 
The  voting  districts  were  without  qualified  voters,  and 
many  of  them  without  qualified  workers  for  repre- 
sentatives.    There  was  nothing  to  do  but  to  give  up. 

In  the  light  of  such  an  industrial  tragedy — and  this 
is  but  one  among  many  that  strew  the  course  of  recent 
years — what  shall  we  say?  The  management  beyond 
a  peradventure  attempted  to  do  the  right  and  fair 
thing  by  its  employees.  But  every  attempt  on  its  part 
to  be  fair  and  to  give  the  unions  the  benefit  of  the  doubt 
was  carried  out  at  just  the  particular  time  that  con- 
vinced the  unions  of  the  weakness  of  the  company 
and  not  of  its  spirit  of  fairness.  Every  attempt  at 
conciliation  abetted  the  oncoming  struggle.  Instead 
of  being  credited  with  liberality  and  fairness,  the  man- 
agement was  accused  of  hypocrisy,  deception,  and 
cunning. 

The  management  had  chosen  the  wrong  time  to  un- 
dertake any  such  adventure  in  shop  democracy.  It 
didn't  understand  the  psychology  of  organized  labor. 
It  never  dreamed  that  this  brand  of  democracy  is  re- 
garded by  Trade  Unions  as  a  challenge  to  them  for  a 
trial  of  strength.  All  these  things  it  had  to  learn  in 
the  mill  of  experience. 

Employers  who  have  neglected  their  labor  policy 
until  the  unions  are  in  the  midst  of  a  drive  to  organize 
them  had  better  watch  their  step.  Then  above  all 
times  is  the  most  treacherous  time  to  begin  a  shop  or- 


A  SHOP  COMMITTEE  THAT  FAILED    121 

ganization  independent  of  union  connection.  The  time 
for  a  company  to  make  a  move  for  a  shop  organiza- 
tion is  when  all  is  peaceful  and  no  organizers  are  about. 
The  employer  must  be  ahead  of  the  game  if  he  expects 
to  win.  Let  him  put  it  off  until  the  unions  are  on 
the  ground  and  getting  better  entrenched  every  day, 
and  he  will  have  the  fight  of  his  life  when  he  wakes  up 
and  tries  to  put  across  an  organization  that  leaves  the 
unions  in  cold  storage. 

This  firm's  experience  demonstrates  once  again  that 
good  motives  are  not  sufficient  for  a  successful  labor 
policy  in  modern  industry.  Labor  must  be  better  un- 
derstood if  the  present  organization  of  industry  is  to 
stand  for  any  considerable  length  of  time.  The  two 
primal  forces  of  today,  as  of  all  ages  past,  are  the 
force  of  numbers  resident  in  the  multitudes  and  the  in- 
tellectual force  possessed  by  the  few.  The  few  can 
lead  and  control  only  so  long  as  they  understand  the 
multitudes  they  are  leading  as  well  as  the  job  to  be 
done.  Capitalists  know  the  job  of  production,  but  do 
they  any  longer  understand  the  organized  workers,  the 
class  conscious  workers,  who  are  developing  programs 
and  philosophies  of  their  own?  Understanding  the 
human  element  in  industry  is  the  acid  test  of  the  com- 
petency of  Capitalism  today.  Ignoring  this  great  hu- 
man problem  and  fumbling  it  add  fuel  to  the  fires  of 
class  conflict,  and  class  conflict  and  production  never 
go  hand  in  hand.  The  leaders  of  industry  must  come 
to  an  understanding  of  the  labor  problem ;  they  will 
have  to  get  on  the  job  with  cool  heads  and  be  able  to 
sit  down  and  converse  dispassionately  with  the  trade 
unionist,  the  socialist,  and  the  communist  to  learn  what 
men  think  the  wrongs  of  the  present  day  are.     The 


122  INDUSTRIAL  GOVERNMENT 

above  account  of  the  bitter  and  costly  fight  over  this 
Shop  Committee  that  Failed  may  well  be  concluded 
with  the  official  statement  of  the  American  Federa- 
tion, adopted  at  its  convention  in  1919.^  The  reso- 
lutions read: 

"WHEREAS,  Many  steel  corporations  and  other  indus- 
trial institutions  have  instituted  in  their  plants  systems  of 
collective  bargaining  akin  to  the  Rockefeller  plan;  and 

"WHEREAS,  Extensive  experience  has  shown  that  while 
the  employers  are  busily  carrying  on  propaganda  lauding 
these  company  unions  to  the  skies,  as  a  great  improvement 
over  trade  unions,  they  are  at  the  same  time  just  as  actively 
enforcing  a  series  of  vicious  practices  that  hamstring  such 
organizations  and  render  them  useless  to  their  employees. 
Of  these  practices  the  following  are  a  few: 

"i.  Unfair  Elections  and  Representation. 

"The  first  essential  for  the  proper  working  of  a  genuine 
collective  bargaining  committee  is  that  it  be  composed  en- 
tirely as  the  organized  workers  may  elect  and  altogether  free 
from  the  company's  influence.  Only  then  can  it  be  truly 
representative  of  the  men  and  responsive  to  their  wishes. 
'Upon  such  committees  bosses,  representing  as  they  do  the 
antagonistic  interests  of  the  company,  are  so  much  poison. 
Not  only  is  it  impossible  for  them  personally  to  represent 
the  men,  but  they  also  negate  the  influence  of  the  real  workers' 
delegates.  Knowing  this  very  well,  the  steel  companies, 
through  campaigns  of  intimidation  and  election  fraud,  load 
their  company  union  committees  with  bosses,  usually  to  the 
point  of  a  majority.  So  baneful  is  this  practice  that,  were 
the  company  unions  otherwise  perfect,  it  alone  would  suffice 
to  entirely  destroy  their  usefulness  to  the  workers. 

"2.  No  Democratic  Organization  Permitted. 

"It  is  common  knowledge  that,  in  order  for  the  workers  to 
arrive  at  a  uniform  understanding  through  the  systematiza- 
tion  and  formulation  of  their  grievances  and  demands,   it 

*  "Proceedings,  Thirty-ninth  Annual  Convention,  American 
Federation  of  Labor,"  p.  302.     (1919.) 


A  SHOP  COMMITTEE  THAT  FAILED    123 

is  necessary  for  them  to  enjoy  and  practice  the  rights  of 
free  speech,  free  assembly,  and  free  association.  They 
must  conduct  an  elaborate  series  of  meetings  under  their 
own  control,  and  generally  carry  on  their  business  in  a 
democratic  organized  way.  But  with  the  company  union 
system  this  is  impossible.  All  independent  organization  and 
meetings  are  prohibited  on  pain  of  discharge.  Consequently 
the  workers  are  kept  voiceless  and  destitute  of  a  program. 
They  are  deliberately  held  down  to  the  status  of  a  mob. 
Under  such  circumstances,  intelligent,  aggressive  action  by 
them  is  out  of  the  question. 

"3.  Intimidation  of  Committeemen. 

"As  part  of  the  general  plan  to  keep  their  company 
unions  from  being  of  any  possible  service  to  their  employees, 
it  is  customary  for  the  companies  to  summarily  discharge 
committeemen  who  dare  to  make  a  stand  in  behalf  of  the 
workers.  The  records  show  a  multitude  of  such  cases.  Being 
unorganized,  the  men  are  powerless  to  defend  their  rep- 
resentatives. The  natural  consequence  is  that  the  com- 
mittee soon  degenerate  into  groups  of  men  supinely  sub- 
servient to  the  wishes  of  the  company  and  deaf  to  those  of 
the  workers. 

"4.  Expert  Assistance   Prohibited. 

"When  dealing  with  their  employees  in  any  manner,  em- 
ployers always  thoroughly  safeguard  themselves  by  enlist- 
ing the  aid  of  the  very  best  brains  procurable.  The  only  way 
the  workers  can  cope  with  this  array  of  experts  is  to  have 
the  help  of  experienced  labor  leaders,  but  under  the  com- 
pany union  system  this  is  impossible.  All  association  with 
trade  union  officials  is  strictly  prohibited.  The  company  re- 
serves to  itself  the  right  to  expert  assistance.  As  a  result 
the  green  workers'  committee,  already  weakened  in  a  dozen 
ways,  is  left  practically  helpless  before  the  experts  upon  the 
company's  side. 

"5.  Company  Union  Lacks  Power. 

"In  establishing  wages,  hours,  and  working  conditions  in 
their  plants,  employers  habitually  use  their  great  economic 
power  to  enforce  their  will.  Therefore  to  secure  just  treat- 
ment, the  only  recourse  for  the  workers  is  to  develop  a 


124  INDUSTRIAL  GOVERNMENT 

power  equally  strong  and  to  confront  their  employers  with 
it.  Unless  they  can  do  this,  their  case  is  hopeless.  In  this 
vital  respect,  the  company  union  is  a  complete  failure.  With 
hardly  a  pretense  of  organization,  unaffiliated  with  other 
groups  of  workers  in  the  same  industry,  destitute  of  funds, 
and  unfitted  to  use  the  strike  weapon,  it  is  totally  unable  to 
enforce  its  will,  should  it  by  a  miracle  have  one  favorable 
to  the  workers.  Weak  and  helpless,  all  it  can  do  is  to  sub- 
mit to  the  dictation  of  the  company.  It  can  make  no  effec- 
tive fight  for  the  men. 

"6.  Company  Diverts  Aim. 

'As  though  the  foregoing  practices  were  not  enough  to 
thoroughly  cripple  the  company  unions,  the  employers  make 
assurance  doubly  sure  by  seeing  to  it  that  their  committees 
ignore  the  vital  needs  of  the  workers  and  confine  themselves 
to  minor  and  extraneous  matters,  such  as  fake  safety-first 
movements,  problems  of  efficiency,  handing  bouquets  to  high 
company  officials,  etc.  Discussions  of  wages,  hours,  and 
working  conditions  are  taboo  on  pain  of  discharge  for  the 
committeeman  who  dares  insist  upon  them.  Thus  the  com- 
pany unions  complete  their  record  of  deceit  and  weakness  by 
dodging  the  labor  question  altogether. 

"WHEREAS,  in  view  of  the  foregoing  facts,  it  is  evident 
that  company  unions  are  unqualified  to  represent  the  inter- 
ests of  the  workers,  and  that  they  are  a  delusion  and  a  snare 
set  up  by  the  companies  for  the  express  purpose  of  deluding 
the  workers  into  the  belief  that  they  have  some  protection 
and  thus  have  no  need  for  trade  union  organization;  there- 
fore, be  it 

"RESOLVED,  That  we  disapprove  and  condemn  all  such 
company  unions  and  advise  our  membership  to  have  nothing 
to  do  with  them;  and  be  it  further 

"RESOLVED,  That  we  demand  the  right  to  bargain 
collectively  through  the  only  kind  of  organization  fitted  for 
this  purpose,  the  trade  union,  and  that  we  stand  loyally  to- 
gether until  this  right  is  conceded  us." 


XI 

TOWARDS  GOVERNMENT  BY  EMPLOYEES 

The  chairman  of  the  shop  committee  was  formerly 
the  acting  business  agent  of  the  shoe  workers'  union. 
After  the  disastrous  strike  of  19 14  this  was  the  only 
shoe  factory  that  would  hire  him.  Now  he  is  the  busi- 
ness agent  of  his  "shop  union."  He  is  elected  by  the 
employees  and  paid  by  them  the  same  wages  that  he 
had  been  earning  at  the  bench.  He  has  his  private 
office,  gives  all  his  time  to  grievances  and  shop  man- 
agement, works  under  the  direction  of  a  shop  com- 
mittee also  elected  by  the  employees. 

A  foreman  comes  in  with  a  discharge  slip.  A  boy 
had  poured  a  can  of  oil  into  a  batch  of  cement.  His 
discharge  had  been  approved  by  the  Joint  Council, 
the  highest  authority  in  the  shop,  composed  of  four 
representatives  of  the  company  and  four  representa- 
tives of  the  employees.  But  the  boy  cannot  be  dis- 
charged unless  that  business  agent  of  the  employees 
O.  K.'s  the  discharge  slip.  He  hesitates,  makes  in- 
quiries, flatly  refuses.  The  foreman  is  surprised,  cha- 
grined, "beats  it." 

The  facts  were  these.  The  boy  had  committed  the 
offense  two  months  before.  The  foreman  had  not  dis- 
charged him  then  but  had  waited  two  months,  until  he 
did  not  need  him.  The  business  agent  of  the  em- 
ployees did  not  approve  that  style  of  discipline. 

125 


126  INDUSTRIAL  GOVERNMENT 

A  new  employee  is  hired  by  the  company's  employ- 
ment department  and  put  to  work.  He  cannot  con- 
tinue at  work  unless  he  joins  the  shop  union  and  pays 
the  dues.  But  he  cannot  join  the  union  unless  the 
chairman  and  the  employees  approve.  So  he  is  sent 
to  the  chairman  for  an  interview.  The  chairman  usually 
knows  whether  he  has  been  a  "scab"  or  a  professional 
trouble-maker.  He  has  had  experience  with  such.  So 
he  tells  the  new  employee  there  is  no  chance  for  him 
in  the  factory.  Or  he  tells  him  that  he  can  go  to  work 
and  explains  to  him  the  advantages  of  the  shop  union 
and  why  he  should  be  a  member  and  pay  the  dues. 

Thus  the  business  agent,  along  with  the  shop  com- 
mittee, has  the  last  word  in  hiring  and  firing. 

This  government  by  employees  did  not  drop  down 
suddenly.  It  was  not  a  brilliant  thought  of  the  Nunn, 
Bush  &  Weldon  Shoe  Company  of  the  city  of  Mil- 
waukee. It  was  not  thrown  at  the  employees  without 
previous  notice.  It  was  not  fought  for  and  won  by 
them  to  make  the  shop  safe  for  democracy.  It  was 
not  a  struggle  for  power.  It  just  growed,  like  Topsy 
and  the  British  constitution.  It  has  taken  seven  years 
to  reach  its  present  shape,  but  it  keeps  on  growing — 
rapidly.  You  have  to  visit  it  at  least  once  in  three 
months,  or  else  you  will  be  talking  about  history  instead 
of  a  live  up-to-the-minute  representative  democracy. 

Seven  years  ago  Mr.  H.  L.  Nunn,  general  manager 
of  the  company,  did  all  of  the  hiring  and  firing.  The 
firm  was  rapidly  expanding.  Superintendents  and 
foremen  got  between  him  and  the  workers.  It  oc- 
curred to  him  that  it  would  be  a  good  thing  to  organ- 
ize the  older  employees  and  give  them  a  voice  in  affairs 
that  concerned  them.     The  older  ones  took  to  it.    They 


GOVERNMENT  BY  EMPLOYEES       127 

organized  the  Nunn-Bush  Cooperative  Association. 
Membership  was  Hmited  to  those  who  had  been  with 
the  company  three  years  or  longer.  The  "board  of 
directors" — not  of  the  corporation  but  of  the  Co- 
operative Association — was  equally  divided,  three  ap- 
pointed by  the  company,  three  elected  from  the  associa- 
tion by  its  members. 

The  general  manager  of  the  company  turned  over 
to  this  board  the  right  to  discharge  any  member  of  the 
association,  as  well  as  the  settlement  of  all  grievances 
affecting  any  member.  If  the  board  could  not  agree 
the  case  was  to  be  settled  by  arbitration. 

The  board  soon  discovered  that  it  was  not  big 
enough.  There  were  twelve  departments  in  the  fac- 
tory, but  only  three  could  find  representation  on  the 
board.  So  a  new  board  was  created — a  grievance 
committee.  The  board  of  directors  of  the  associa- 
tion appointed  this  grievance  committee  of  twelve 
members,  one  from  each  department.  The  grieva;  e 
committee  could  only  investigate  and  recommend.  It 
investigated  grievances,  made  findings  of  fact,  then 
made  its  recommendations  to  the  board  of  directors. 

The  next  step  in  constitutional  history  was  the  ex- 
tension of  the  suffrage.  Only  members  of  the  Coop- 
erative Association  vote  for  the  employee  representa- 
tives on  the  Joint  Council. 

After  a  short  experience  the  membership  was  en- 
larged by  admitting  employees  after  two  years'  serv- 
ice, instead  of  three.  Then,  after  a  little  more  ex- 
perience, it  was  reduced  to  one  year.  Then,  an  at- 
tack from  the  outside  convinced  them  that  they  must 
admit  every  regular  employee  to  membership  in  the 
association. 


128  INDUSTRIAL  GOVERNMENT 

The  United  Shoe  Workers,  a  seceding  union  from 
the  Boot  and  Shoe  Workers  of  America,  began  organ- 
izing one  of  the  departments.  About  a  dozen  of  the 
forty  employees  in  that  department  had  signed  up. 
They  were  the  more  recent  employees  not  eligible  to 
the  association.  The  situation  became  acute.  A  meet- 
ing of  that  department  was  called.  Each  side  pre- 
sented its  case.  The  decision  was  reached  to  remain 
with  the  association.  So  the  suffrage  was  widened  to 
admit  all  employees  who  might  otherwise  be  admitted 
to  the  United  Shoe  Workers'  Union. 

It  was  before  this  trouble  that  Louis  Karl,  formerly 
the  acting  business  agent  of  the  union,  found  employ- 
ment in  the  shop  and  membership  in  the  Cooperative 
Association,  although  retaining  his  membership  in  the 
Shoe  Workers'   Union. 

The  extension  of  the  suffrage  was  followed  by  a 
revision  of  the  constitution.  The  old  "board  of  di- 
rectors" of  six  members  now  gave  way  to  a  "Joint 
Council"  of  eight  members — four  company  appointees, 
four  employee  representatives,  the  latter  elected  by  all 
the  employees. 

Much  more  important  was  the  change  in  the  griev- 
ance committee.  The  former  committee  was  ap- 
pointed by  the  board  of  directors.  The  new  one  was 
elected  by  the  employees.  Each  of  the  twelve  depart- 
ments elects  separately  its  representative  on  the  griev- 
ance committee  of  twelve.  The  grievance  committee 
now  becomes  a  House  of  Representatives  and  its  name 
is  changed  to  shop  committee. 

The  next  step  was  evidently  for  this  shop  commit- 
tee to  take  over  power  from  the  Joint  Council.  The 
shop  committee  represents  solely  the  employees,  elected 


GOVERNMENT  BY  EMPLOYEES         129 

by  departments.  The  Joint  Council  is  equally  divided 
between  employer  and  employees,  the  latter  elected  by 
the  whole  shop. 

The  shop  committee  began  to  grow  in  several  direc- 
tions. It  added  a  chairman,  nominated  by  itself, 
elected  and  paid  by  the  employees.  This  is  Louis 
Karl,  the  business  agent.  Karl  presides  at  all  meet- 
ings of  the  shop  committee.  He  personally  investi- 
gates all  grievances  in  the  factory,  takes  them  up  with 
the  foreman  or  superintendent,  and  in  this  way  set- 
tles 80  per  cent  of  the  grievances.  He  investigates 
wages  and  hours  in  other  shops.  The  company  gives 
him  access  to  every  part  of  the  factory  and  all  its  rec- 
ords and  books.  He  is  a  bureau  of  investigation  and 
statistics  for  the  shop  committee  and  the  employees. 

But  the  shop  committee  finds  itself  too  bulky  to 
handle  all  the  grievances.  So  the  next  step  was  to 
appoint  an  "investigating  committee,"  composed  of  its 
chairman,  the  representative  from  the  department 
where  the  trouble  arises  and  three  others  from  its  own 
membership.  Karl  is  chairman  also  of  this  investigat- 
ing committee.  He  brings  before  it  any  of  the  troubles 
he  has  not  been  able  to  settle  directly  with  the  fore- 
man, superintendent,  or  general  manager.  The  com- 
mittee notifies  both  sides  to  appear  and  present  their 
respective  sides  of  the  controversy.  Here  the  dissat- 
isfied worker  is  not  afraid  to  express  himself.  Karl 
tells  him  to  forget  his  "grammar"  and  tell  the  commit- 
tee just  what  his  trouble  is  and  what  he  thinks  about  it. 

Seldom  is  a  matter  seriously  contested.  Before  the 
investigating  committee  recently  a  small  group  of  em- 
ployees asked  an  increase  in  pay  and  submitted  what 
they  claimed  were  the  "facts"  to  the  committee.    The 


I30  INDUSTRIAL  GOVERNMENT 

company  took  issue  on  these  "facts."  The  committee 
had  previously  gathered  information  which  conflicted 
with  the  statements  of  the  complainants.  It  concluded 
that  here  was  a  bald  attempt  to  deceive  them.  It  sent 
back  the  reply:  "If  you  want  this  committee  to  rep- 
resent you,  you  must  tell  the  truth." 

The  investigating  committee  completes  its  work  on 
Wednesday,  reports  its  findings  and  recommendations 
to  the  shop  committee  of  twelve  which  meets  on  Thurs- 
day at  4  o'clock. 

Here  Karl  again  is  chairman.  The  shop  committee 
may  also  take  testimony  if  it  wishes.  One  of  the  best 
workmen  had  been  transferred  to  a  new  job  with  the 
understanding  that  he  would  receive  the  same  pay  by 
the  week.  After  several  months  he  showed  no  im- 
provement. The  company,  suspecting  that  he  was  tak- 
ing advantage  of  the  situation,  appeared  before  the 
shop  committee  and  asked  permission  to  substitute  a 
piece  rate.  The  worker  stated  that  he  would  have  his 
own  price  or  quit.  The  committee  decided  against  him 
and  he  quit. 

One  of  the  representatives  of  the  shop  committee 
reports  that  two  workmen  in  his  department  wanted 
"more  money."  The  committee  voted  to  investigate 
this  claim.  The  next  Thursday  the  same  representa- 
tive reports  two  or  three  others  in  the  same  department 
who  had  asked  him  to  get  them  a  "raise."  This  time 
the  committee  decided  to  investigate  the  entire  wage 
scale  in  that  department,  and  agreed  that  it  was  their 
business  to  do  justice,  not  merely  for  those  who  had 
the  "nerve  to  kick,"  but  for  everybody.  So  they  in- 
struct Karl  and  the  investigating  committee  to  find  out 
what  the  other  shoe  factories  are  paying  for  the  same 


GOVERNMENT  BY  EMPLOYEES        131 

kind  of  work.  They  reason  that  it  would  not  be  fair 
to  ask  the  company  to  pay  wages  that  would  put  it  at 
a  disadvantage  with  competitors.  They  instruct  the 
chairman  also  to  call  a  secret  meeting  of  that  depart- 
ment and  report  to  that  meeting  the  schedule  of  wages 
prepared  by  the  investigating  committee. 

Departmental  meetings  have  their  place  in  this 
scheme  of  government.  A  department  may,  if  it 
wishes,  call  a  meeting  and  try  to  settle  a  question  di- 
rectly with  the  management.  It  is  at  these  meetings 
also  that  new  members  are  admitted  to  the  association, 
for,  at  the  present  stage  of  development,  any  depart- 
ment can  deny  an  employee's  application,  and  this 
obliges  the  company  to  discharge  that  employee.  The 
shop  committee  also  calls  departmental  meetings  as  re- 
cited above  to  pass  judgment  on  its  proposals,  before 
the  committee  presents  them  to  the  company. 

Up  to  October,  191 9,  the  shop  committee  was  merely 
an  investigating  committee.  It  had  no  power  to  de- 
cide a  dispute.  It  reported  all  cases  to  the  Joint  Coun- 
cil, which  alone  had  power  to  decide.  The  Joint  Coun- 
cil represents  equally  the  company  and  the  employees. 
The  shop  committee  represents  only  the  employees. 
But  it  was  found  that  the  Joint  Council  was  actually 
approving  every  report  and  recommendation  of  the 
shop  committee — with  one  exception.  So  the  next 
step  was  taken.  If  the  Joint  Council  nearly  always  ap- 
proves, why  not  give  the  shop  committee  power  to  de- 
cide at  once  and  let  the  Joint  Council  decide  only  when 
either  side  to  a  dispute  appeals  to  the  Joint  Council? 

This  change  was  made.  The  Joint  Council  is  now 
a  court  of  appeals.     The  shop  committee  of  employees 


132  INDUSTRIAL  GOVERNMENT 

is  the  body  that  makes  final  decision,  unless  there  is  an 
appeal. 

Along  with  it,  another  change  was  made.  The  em- 
ployee members  of  the  Joint  Council  had  been  elected 
by  direct  vote  of  all  employees.  Now  they  are  elected 
by  the  shop  committee,  and  the  chairman  of  the  Joint 
Council  must  come  from  the  employees'  side.  So  far, 
the  Joint  Council  has  never  failed  to  reach  a  unani- 
mous decision,  except  once.  If  "t  divides  equally,  then 
the  case  goes  to  arbitration,  but  this  has  not  happened 
as  yet. 

The  Joint  Council  is  at  times  even  more  considerate 
of  the  individual  employee  than  the  shop  committee. 
A  girl  was  discharged  and  the  discharge  was  approved 
by  the  chairman  and  the  shop  committee.  The  girl 
appealed  to  the  Joint  Council.  The  testimony  showed 
that  the  foreman  had  given  her  a  task  that  she  was 
not  performing  according  to  directions.  He  ordered 
her  to  do  what  he  told  her  or  "get  out."  She  got  mad 
and  balked.  Dismissal  followed.  The  girl  admitted 
to  the  council  that  her  actions  were  wrong,  but  insisted 
that  the  foreman  had  threatened  her  and  was  not  a 
gentleman.  Both  sides  argued  the  case.  The  council 
discussed  it  at  length.  It  was  a  choice  between  in- 
subordination and  gentility.  The  council  decided  to 
reinstate  the  girl  in  her  old  position  and  to  advise  the 
foreman  to  be  a  gentleman. 

We  come  to  the  last  chapter  up  to  date. 

Karl  has  resigned  his  membership  in  the  United 
Shoe  Workers'  Union.  That  is  about  what  the  trade 
unions  and  the  American  Federation  of  Labor  have 
said  would  happen.     The   "shop  employees'   union," 


GOVERNMENT  BY  EMPLOYEES         133 

they  say,  is  started  to  undermine  and  oust  the  trade 
union. 

But  the  matter  is  more  complex  than  that. 

Five  years  ago  Karl  was  the  militant  leader  of  the 
militant  United  Shoe  Workers,  a  union  which  had  se- 
ceded from  the  conservative  Boot  and  Shoe  Workers 
of  the  American  Federation  of  Labor,  The  Boot  and 
Shoe  Workers'  Union  always  believed  in  arbitration. 
They  had  a  union  label.  The  shoe  business  is  highly 
competitive.  The  union  did  not  control  all  of  the 
shops.  The  universal  rule  in  the  business  is  piecework. 
Hence  the  conservative  union  did  not  try  to  force  piece- 
rates  above  the  rates  paid  by  non-union  shops.  What 
it  offered  to  its  members  was  practically  the  same 
piece-rates  as  in  non-union  shops,  but  with  this  ad- 
vantage, that  the  union  label  and  the  arbitration  agree- 
ment would  give  them  steady  employment.  They 
could  increase  their  earnings  for  the  year,  although  they 
were  paid  the  same  rates  per  piece  as  non-unionists. 

This  was  partly  why  the  militant  union  seceded 
from  the  conservative  union.  It  wanted  to  force  up 
the  piece-rates  by  direct  action  without  the  label  and 
without  arbitration. 

Karl  led  them  in  the  fight.  It  failed.  Karl  now 
is  leading  a  "shop  employees'  union."  His  fellow- 
workers  trust  him,  for  they  know  the  sacrifices  he  has 
made  in  behalf  of  labor. 

He  frequently  prevents  a  fellow-worker  from  tak- 
ing hasty  and  ill-advised  action. 

In  March,  191 9,  they  reduced  the  hours  to  forty-six. 

They  have  put  in  a  little  rest-period  of  ten  minutes 
every  forenoon. 


134  INDUSTRIAL  GOVERNMENT 

They  believe  they  are  earning  higher  wages  for 
shorter  hours  than  employees  in  competing  factories. 

The  shop  union  is  becoming  gradually  an  employ- 
ees' union,  with  the  consent  of  the  company.  Com- 
petition still  continues  to  keep  down  the  piece-rates, 
with  the  consent  of  the  employees'  union. 

What  ought  Karl  to  do?  Should  he  stick  to  the 
militant  Shoe  Workers'  Union  that  seceded? 

Should  he  join  the  conservative  Boot  and  Shoe 
Workers'  Union  and  get  his  company  to  adopt  the 
label? 

Should  he  stick  to  the  Nunn,  Bush  &  Weldon  Co- 
operative Association  and  gradually  take  over  govern- 
ment by  employees  as  fast  as  they  show  themselves 
competent  to  govern? 


CHAPTER  XII 
PROFIT-SHARING  THAT  FAILED 

When  we  visited  the  Wayne  Knitting  Mills,  of 
Fort  Wayne,  Indiana,  in  August,  19 19,  Mr.  Theodore 
F.  Thieme,  the  founder,  president,  manager  and  ideal- 
ist, was  out  of  town.  Practically  all  that  we  learned 
about  the  establishment  we  learned  from  employees. 
These  employees  were  officers  and  members  of  "Knit- 
ters' Union  No.  2,"  the  local  branch  of  the  national 
trade  union  of  Full-Fashioned  Hosiery  Workers.  On 
the  strength  of  their  enthusiasm  we  placed  the  Wayne 
Knitting  Mills  at  the  top  of  our  list,  "Faith  in  Man- 
agement." Sixteen  months  later,  after  prices  had  be- 
gun to  tumble,  these  same  employees  were  out  on 
strike  and  the  whole  works  was  shut  down.  You 
never  can  say  anything  for  sure  about  labor  and  man- 
agement. You  ought  always  to  write  history  and 
never  prophesy.  Mankind  has  a  distressful  way  of 
swinging  from  intoxication  to  the  "day  after."  And 
it  seems  to  follow  the  swing  of  prices  from  inflation 
to  deflation. 

Here  is  what  the  employees  told  us  and  showed  us 
at  the  height  of  pecuniary  intoxication.  The  business 
was  started  in  1891.  Mr.  Thieme  had  been  educated 
in  a  Lutheran  theological  school.  He  taught  school, 
then  went  into  the  drug  store  business  at  Fort  Wayne, 
then  sold  out  and  went  to  Europe  to  see  if  he  could 

135 


136  INDUSTRIAL  GOVERNMENT 

find  an  industry  that  might  be  moved  to  America  un- 
der the  protection  of  the  new  McKinley  Tariff,  He 
hit  upon  the  full-fashioned  hosiery  business,  in  which 
fifty  or  more  stockings  are  knitted  at  once  on  a  great 
machine  tended  by  a  highly  skilled  mechanic  and  three 
or  four  girl  helpers.  He  organized  a  $30,000  cor- 
poration at  Fort  Wayne,  brought  over  from  Germany 
twenty-five  experienced  knitters  and  finishers,  and 
started  in  a  rented  store  room. 

From  this  small  beginning  has  grown  the  great  busi- 
ness which  now  employs  nineteen  hundred  people,  with 
a  capital  stock  of  $1,200,000,  not  a  dollar  of  which  is 
water,  according  to  the  boast  of  its  proud  and  confi- 
dent employees.  Six  of  the  twenty-five  employees  who 
started  with  the  original  plant  thirty  years  ago  are  with 
it  today.  About  seventy  employees  have  been  with 
the  company  twenty-five  years  or  more. 

The  Wayne  Knitting  Mills,  as  might  be  expected 
from  its  founder,  president  and  manager,  presents 
some  unusual  features.  We  have  found  university 
professors,  of  late,  in  demand  as  employment  man- 
agers. We  have  found  even  labor  leaders  drafted 
into  this  service.  The  Wayne  Knitting  Alills  added 
to  the  variety  by  bringing  in  a  man  who  had  been  law- 
yer, judge,  and  political  reformer — Mr.  Ross  F,  Lock- 
ridge,  fellow-worker  with  Mr.  Thieme  in  the  fight  of 
the  latter  for  better  government  in  Indiana  and  Fort 
Wayne.  For  Mr.  Thieme  was  a  political  reformer  as 
well  as  an  industrial  reformer.  He  was  founder  of 
the  Citizen  League  of  Indiana,  substantial  supporter  of 
the  "New  Constitution"  movement  for  the  state,  as 
well  as  of  local  movements  for  public  ownership  of 
public  utilities  and  of  general  political  house-cleaning. 


PROFIT-SHARING  THAT  FAILED     137 

At  the  head  of  The  Citizen,  the  official  organ  of  his 
Citizen  League,  edited  by  Mr.  Thieme  and  Mr,  Lock- 
ridge,  had  appeared  Lowell's  anti-slavery  defiance: 

The    time    is    ripe,    and    rotten    ripe,    for    change; 
Then  let  it  come;  I  have  no  dread  of  what 
Is  called  for  by  the  instincts  of  mankind. 
Nor  think  I  that  the  world  would  fall  apart 
Because  we  tear  a  parchment  more  or  less. 

With  a  political  reformer  as  president  and  a  political 
reformer  in  charge  of  employment  and  welfare  activi- 
ties, one  is  not  surprised  to  find  surprises.  Here  is 
an  immense  club  house,  built  by  the  company — really 
more  than  an  ordinary  club  house,  for  it  is  in  fact  and 
name  a  "community  center"  for  management  and  la- 
bor, for  social,  educational,  political  and  union  gath- 
erings, as  well  as  a  home  for  young  women  workers 
whose  families  do  not  live  in  Fort  Wayne,  and  who 
prefer  to  live  together  here  rather  than  outside  in  the 
boarding  houses  of  the  city. 

The  president  and  secretary  of  the  union  showed  us 
through  the  place;  they  fed  us  in  the  great  dining- 
room  and  told  us  of  the  goings-on  in  the  place.  They 
showed  us  a  pamphlet  on  public  ownership  that  Mr. 
Thieme  handed  them  to  read.  They  showed  us  copies 
of  Rav-lings,  the  shop  paper,  with  a  column  or  two 
edited  by  "Knitters'  Union  No.  2,"  and  its  notices  of 
union  elections  and  its  comments  on  union  affairs  and 
events.  Rav-lings  had  a  column  of  "Community  Cen- 
ter Notes."  Mr.  Thieme  had  lectured  on  the  present 
system  of  city  government  and  the  issues  at  the  com- 
ing municipal  election;  at  another  time  on  "The  Po- 
litical Machine";  at  another  time,  after  six  months' 
absence   in  recovering  his  health,   on   "World   Poli- 


138  INDUSTRIAL  GOVERNMENT 

tics" — each  lecture  followed  by  a  free-for-all.  He 
had  also  attended  the  union  meetings,  as  well  as  the 
Community  Center  meetings  and  had  spoken  there  on 
public  questions,  such  as  workmen's  insurance,  public 
ownership  and  the  tariflf.  Colonel  Foster,  the  fore- 
most promoter  of  park  improvements,  had  talked  to 
the  Community  Center  on  "how  to  secure  our  most 
needed  public  improvements."  The  biggest  crowd 
that  attended  the  Community  Center  was  the  one  that 
heard  the  debate  on  the  liquor  problem — described  as 
"a  roaring  success."  Another  meeting  was  "a  great 
suffragette  demonstration." 

The  employees  did  not  hesitate  to  follow  the  exam- 
ple of  their  employers.  Here  is  a  program  offered  by 
them  in  Rav-lings.  "Every  person,  male  and  female, 
should  be  on  an  equality,  both  as  to  voting  and  power 
to  hold  office."  "In  order  to  get  the  form  of  govern- 
ment we  want  and  to  keep  it  most  suited  to  our  needs, 
we  must  have  constitutional  home  rule."  "We  can- 
not, under  the  present  two-per-cent  limit,  buy  and  op- 
erate the  gas  plant,  street  railway,  or  any  other  new 
business.     This  limitation  must  be  raised." 

Rav-lings  tells  us  also  of  a  talk  by  John  A.  Thieme, 
brother  of  the  founder:  "Even  in  our  own  good 
times,"  he  said,  "times  of  a  great  deal  of  frivolity  and 
amusement,  there  are  surely  openings  for  reforms  and 
changes,  and  we  have  many  men  and  women  who  have 
ideas,  ideals,  convictions  and  fads,  if  you  please,  which 
they  would  like  to  bring  before  the  public.  This,  then, 
is  the  place  to  come  to  air  your  ideas  and  get  these 
reforms  out  of  your  system.  The  people  will  be  glad 
to  hear  and  take  up  these  new  ideas." 

But  political  reform  was  not  the  only  reform  agi- 


PROFIT-SHARING  THAT  FAILED      139 

tated  in  this  Community  Center.  Industrial  Reform 
was  prominent.  We  were  told  of  the  Textile  Indus- 
trial Club,  composed  of  the  management  and  upper 
workmen,  and  of  other  clubs  and  committees  discuss- 
ing everything  from  street-car  service  to  the  best  way 
to  handle  orders  in  the  finishing  department.  Here 
were  classes  held  on  company  time  with  teachers  pro- 
vided under  the  federal  and  state  laws  granting  aid 
for  vocational  education.  These  classes  are  adapted 
to  all  levels  of  intelligence  and  need.  The  hundreds 
of  girls  in  the  factory,  looking  like  healthy  school 
girls,  have  improved  themselves  through  these  classes. 
More  pretentious  are  the  courses  for  young  employees 
in  Economics,  Psychology,  Public  Speaking,  Political 
Science,  taught  in  the  evenings  by  university  profes- 
sors. 

As  a  result  of  these  industrial  and  educational  clubs 
and  classes  the  place  buzzes  with  plans  for  improv- 
ing this  or  that  condition,  and  with  new  problems  con- 
stantly offered  for  solution  as  new  conditions  arise. 
A  woman's  organization,  the  Waynew  Club,  was  re- 
cently formed — of  foreladies  and  inspectors,  forty-two 
in  number — to  promote  cooperation  among  inspectors, 
to  improve  inspection,  to  seek  the  principal  causes  for 
defective  work,  to  bring  about  "a  general  and  uniform 
adoption  of  remedies." 

The  union  organization,  too,  was  alive  with  public 
questions  as  well  as  plans  and  efforts  to  increase  pro- 
duction. The  union  originally  included  only  the  three 
hundred  men  knitters  on  the  full-fashion  machines. 
The  men  later  opened  the  organization  to  their  girl- 
helpers — each  man  has  three — and  then  they  went  the 
whole  way  and  threw  open  the  door  to  every  employee 


I40  INDUSTRIAL  GOVERNMENT 

in  the  factory  down  to  the  youngest  girl.  The  girls 
were  coming  in  slowly,  it  is  true,  but  surely.  They 
were  not  coming  because  of  solicitation.  The  union 
did  not  want  a  lot  of  members  whom  they  would  find 
difficulty  in  holding.  They  wanted  members  who 
came  because  they  wanted  to  come.  They  were  com- 
ing in  partly  because  the  $50  a  week  of  the  men  work- 
ers on  the  full-fashioned  hosiery  machines  looked  good 
to  them.  Their  own  wages  were  coming  up  rapidly. 
The  minimum  wage  of  $12  a  week  applied  to  young 
girls  only.  The  girl  workers  averaged  $18  or  $20  a 
week,  to  which  the  profit-sharing  bonus  must  be  added. 

That  the  union  did  not  urge  the  girls  to  come  in, 
did  not  mean,  however,  that  the  union  was  not  inter- 
ested in  the  welfare  of  non-members.  Their  shop 
committee  frequently  took  up  with  Mr.  Thieme  mat- 
ters of  concern  to  the  entire  plant;  and  Mr,  Thieme  in 
turn  referred  to  the  committee  of  the  union  matters 
concerning  the  whole  plant  in  which  he  wanted  the  co- 
operation of  this  force.  The  union,  according  to  the 
men,  was  actually  a  convenience  to  the  company.  It 
was  a  body  through  which  changes  could  be  presented 
to  all  the  people,  and  its  power  was  sometimes  exer- 
cised in  a  most  salutary  way,  where  disciplinary  force 
was  needed. 

There  was  no  doubt  of  it.  The  organized  workers 
were  sincerely  interested  in  efficient  production.  They 
had  no  fear  of  being  placed  at  a  disadvantage  because 
of  high  wages  for  efficiency,  and  were  confident  in  the 
good  faith  of  the  management.  They  told  us  how 
they  were  always  able  to  present  their  case  to  the  com- 
pany officials  and  to  receive  satisfaction;  how  the  com- 
pany kept  their  employees  on  during  the  period  of 


PROFIT-SHARING  THAT  FAILED      141 

shortage  of  dyes  in  1914-15,  and  continued  to  manu- 
facture as  before  and  to  take  the  risk  of  pihng  up 
large  stocks ;  how,  nevertheless,  large  profits  were  un- 
expectedly made  when  a  tremendous  demand  set  in, 
so  that  a  policy  fair  to  employees  proved  to  be  profit- 
able to  the  firm;  how  this  had  always  been  the  policy 
of  the  company,  so  that,  in  the  last  twenty-four  years, 
the  employees  had  not  lost  a  single  day  on  account  of 
lack  of  work.  This  was  due  to  the  large  surplus 
which  the  company  accumulated  to  take  them  over 
periods  of  depression.  They  told  us  there  had  never 
been  any  water  in  the  stock,  and,  in  the  periods  of 
highest  profits,  the  stockholders  had  never  been  paid 
more  than  twelve  per  cent. 

Along  with  it  all  they  told  us  of  their  own  interest 
in  efficient  production  and  of  items  which  they  had 
contributed  towards  greater  economies,  such  as  the 
raveling  out  of  spoiled  articles  and  use  of  the  thread 
later  in  weaving;  the  salvage  of  the  thread  at  the  bot- 
tom of  the  spool  which  used  to  be  thrown  away;  the 
saving  of  steps  by  a  change  in  the  position  of  the  box 
holding  the  spools,  and  similar  economies. 

These  skilled  workmen  had  a  pride  in  their  work. 
Their  job  requires  real  workmanship.  They  were 
proud  to  be  treated  like  men.     They  think  and  study. 

But  we  were  surprised  to  find  a  trade  union  along 
with  all  these  welfare  and  educational  activities,  this 
profit-sharing  which  adds  twenty-five  per  cent  to  the 
already  high  wages,  this  club  house,  community  center, 
textile  club,  and  other  harmonizing  agencies.  Yet  here 
it  was — a  real  union,  with  spirit,  with  prospects,  and 
most  of  all,  with  confident  praise  of  the  management. 
The  union  officers  noted  our  surprise  and  explained 


142  INDUSTRIAL  GOVERNMENT 

how  the  union  came  into  existence.  "Mr.  Thieme  was 
away  for  a  long  time.  He  was  reported  to  be  very 
sick.  Things  were  going  bad.  So  we  organized. 
Then  he  came  back.  Things  began  to  go  all  right 
again.  But  we  keep  up  the  union  partly  because  we 
are  afraid  he  might  die." 

The  company  described  their  relation  with  the  union 
in  a  pamphlet  shown  to  us  by  the  union  officers  :  "We 
recognize  the  union,  and  the  union  recognizes  the  man- 
agement. Annually,  with  the  election  of  new  officers, 
the  union  appoints  a  factory  committee  of  from  twelve 
to  fifteen  men,  who  meet  with  the  management  upon 
a  call  from  either  side,  when  mutual  plans,  sugges- 
tions, grievances,  recommendations,  etc.,  are  discussed 
and  acted  upon.  These  meetings  are  attended  by  the 
general  manager,  superintendent  and  other  assistants 
as  well  as  such  shop  foremen  as  are  interested  in  the 
subjects  under  consideration.  Through  this  close  con- 
tact of  officials  and  working  people,  a  better  under- 
standing of  each  other's  wants  and  viewpoints  is  cre- 
ated. Naturally,  it  took  some  years  before  sufficient 
confidence  and  mutual  respect  were  inspired  to  get  re- 
sults and  convince  both  sides  of  fairness.  It  is  not 
entirely  a  one-sided  proposition,  for  while  labor  pre- 
sents its  grievances  to  the  management,  on  the  other 
hand  the  management  brings  its  problems  and  griev- 
ances, affecting  such  questions  as  production,  quality 
and  labor  supply,  before  the  committee.  In  other 
words,  the  management  uses  the  union  quite  as  freely 
as  the  union  uses  the  management.  It  goes  without 
saying  that  while  the  management  has  obtained  an 
ideal  situation  with  regard  to  labor,  quality  of  work, 
etc.,  the  employees  have  also  obtained  a  maximum  of 


PROFIT-SHARING  THAT  FAILED      143 

wages  and  bonuses,  as  well  as  a  fifty-fifty  share  in  the 
profits.  Yet  we  are  not  averse  to  saying  that  from 
the  time  that  this  arrangement  became  truly  operative 
the  stockholders'  profits  went  up  every  year.  In  other 
words,  it  has  proven  up  to  this  time  a  profitable  in- 
vestment for  both  capital  and  labor." 

This  was  Mr.  Thieme's  ideal.  "We  have  no  more 
important  function  today  in  the  Wayne  Knitting 
Mills,"  he  said,  "than  the  development  of  our  welfare 
work.  This  we  are  doing  in  part  through  certain 
aids  such  as  old  age  pensions,  special  assistance  to  sick 
and  needy,  sick  and  accident  insurance,  group  insur- 
ance and  health  department,  which  do  much  to  allevi- 
ate misfortune.  Important  as  these  are,  they  are  sec- 
ondary in  my  judgment  to  our  more  constructive  wel- 
fare work  through  profit  sharing,  club  house  culture 
and  recreation,  which  organize  and  promote  efficiency, 
good  fortune,  good  feeling,  community  well  being  and 
satisfaction,  individual  success  and  leadership.  It  is 
this  kind  of  welfare  work  that  must  be  vastly  increased 
through  manufacturing  institutions  in  the  immediate 
future.  But  this  welfare  work  must  not  operate  to 
keep  the  payroll  down." 

Thus  it  was  in  August,  19 19.  In  October,  1920,  the 
financial  intoxication  began  to  pass  off.  Payrolls  had 
previously  been  adjusted  to  meet  the  high  cost  of  liv- 
ing, until  in  June,  1920,  the  last  advance  had  been 
made,  after  the  profit-sharing  checks  for  twenty-five 
per  cent  on  wages,  out  of  the  preceding  year's  earn- 
ings, had  been  issued  to  all  the  workers.  Everything 
looked  rosy.  Then  the  union  committee  demanded 
that  the  twenty-five  per  cent  profit-sharing  bonus 
should  be  put  thereafter  into  the  weekly  pay  envelope 


144  INDUSTRIAL  GOVERNMENT 

instead  of  paying  it  at  the  end  of  the  year.  The  com- 
pany got  at  once  a  rude  glimpse  of  the  workers'  psy- 
chology. To  the  workers,  profit-sharing  in  cash  is 
but  deferred  wages.  It  was  here,  as  always,  wage- 
psychology  against  profit-psychology.  But  the  glimpse 
in  June  was  not  rude  enough — the  intoxication  was  on 
the  company  also.  Business  was  rosy.  The  company 
agreed  to  take  its  chances,  make  everybody  happy  and 
assure  ideal  working  conditions  for  the  season.  But 
they  hesitated  enough  to  agree  only  to  the  commit- 
tee's program  for  a  period  of  six  months,  ending  De- 
cember 1st.  Thus  for  six  months,  unearned  profits 
became  current  wages.  Profit-psychology  yielded  to 
wage-psychology,  notwithstanding  wages  proper  had 
already  kept  up  with  the  cost  of  living. 

In  October  the  company  found  itself  with  $2,000,- 
000  inventory  depreciated  approximately  forty  per 
cent.  Mr.  Thieme  called  in  the  committee.  He  pro- 
posed to  take  off  the  last  advance  in  wages  proper, 
made  in  June,  and  to  pay  profits  as  before,  only  when 
earned,  at  the  end  of  the  year.  He  met  the  committee 
often.  He  wrote  a  long  statement  which  was  read  at 
the  union  meeting.  He  implored  them  to  accept  his 
statements  and  to  have  confidence  in  his  judgment  and 
integrity.  He  appealed  to  individuals  and  presented 
facts  and  figures  of  every  kind. 

But  wage-psychology  could  not  think  in  terms  of 
profit-psychology.  Wages  are  paid  now,  but  profits 
are  paid  a  year,  maybe  ten  years  from  now.  They  re- 
quire different  kinds  of  imagination.  The  committee 
of  the  union  went  to  headquarters  at  Philadelphia. 
They  came  back  confirmed  in  what  they  started  with. 
"No  wage  reductions  is  the  motto  of  our  union," 


PROFIT-SHARING  THAT  FAILED      145 

On  December  ist  the  1,900  employees  walked  out. 

It  was  nuts  for  the  company.  Raw  material  had 
been  going  down  in  price  since  October — twenty-five 
per  cent  in  November,  then  fifty  per  cent  in  December. 
The  price  made  on  hosiery  in  October  was  already  too 
high  in  November,  and  November  prices  much  too 
high  in  December.  Even  had  the  union  accepted  the 
company's  offer  the  company  claimed  it  would  have 
been  losing  money,  although  it  would  have  been  fol- 
lowing its  twenty-five-year  policy  of  not  laying  off  the 
workers,  even  at  a  loss,  but  making  up  the  loss  out  of 
its  unemployment  reserve.  The  union  laid  itself  off, 
and  the  reserve  was  not  called  upon. 

On  the  worker's  side,  the  union  members  felt  that 
Mr.  Thieme  had  fallen  under  the  influence  of  other 
stockholders,  who  objected  to  the  too  high  wages  with 
their  bad  effects  on  the  labor-market  of  Fort  Wayne. 

But  Mr.  Thieme  himself  believes  that  he  has  not 
changed  his  mind.  He  is  only  adjusting  himself  to 
new  conditions.  He  warned  the  union  what  would 
happen.  He  used  all  his  personal  influence  and  pres- 
tige. A  strike  would  be  a  slap  at  him  personally.  It 
would  say  that  they  did  not  trust  him,  that  he  was  not 
straight.  If  so,  he  would  not  continue  to  do  business 
with  those  who  repudiated  him  after  these  many  years 
of  confidence. 

So  his  new  program,  when  the  strike  shall  end  and 
the  men  come  back,  is  the  Open  Shop — no  discrimina- 
tion between  union  and  non-union  labor,  but  no  recog- 
nition of  the  union  through  committees  or  otherwise. 
Instead,  there  will  be  a  plan  of  organization  which 
will  put  factory  operations  in  control  of  the  workers, 
by  the  workers,  excluding  officers  of  the  company.    All 


146  INDUSTRIAL  GOVERNMENT 

of  the  other  features  will  not  only  be  continued,  but 
expanded.  Profit-sharing  again  will  be  the  leading 
feature,  and  with  it,  life,  accident,  sickness  and  unem- 
ployment insurance,  old-age  pensions,  club  house,  com- 
munity center,  vocational  education,  efficiency  through 
committees,  and  so  on. 

Was  it  profit-sharing  or  unionism  that  fell  down? 


XIII 
FROM  WELFARE  TO  DEMOCRACY 

The  management  took  the  initiative,  in  1912,  and 
incorporated  the  Employees'  Mutual  Benefit  Associa- 
tion of  The  Milwaukee  Electric  Railway  and  Light 
Company.  After  the  details  were  worked  out  the 
proposal  was  submitted  to  a  mass  meeting  of  employ- 
ees. They  voted  to  adopt  it.  Membership  would  be 
voluntary,  would  be  open  to  all,  but  after  a  lapse  of 
four  months  new  members  must  pass  a  physical  ex- 
amination and  be  within  twenty  and  twenty-five  years 
of  age.  About  one-half  of  the  employees  were  enrolled. 
The  initiation  fee  is  $1,  monthly  dues  fifty  cents,  and 
the  company  contributes  the  running  expenses  and  a 
sum  equal  to  the  total  contributions  of  employees. 

The  benefits  would  be  $1  per  day  of  sickness  for 
the  first  ICXD  days,  then  fifty  cents  per  day  for  the  next 
100  days.  Life  insurance  would  be  $300.  The  Asso- 
ciation would  be  governed  by  a  Board  of  Directors,  the 
employees  electing  twelve,  the  company  selecting  an 
equal  number.  The  company  side  elects  the  president 
and  he  appoints  an  executive  committee  of  three  from 
the  employees  and  two  from  the  company. 

While  this  Association  was  being  formed  the  com- 
pany placed  its  social  policies,  other  than  those  en- 
trusted to  the  Association,  under  the  control  of  a  gen- 
eral director.    He  was  made  Secretary  of  the  Associa- 

147 


148  INDUSTRIAL  GOVERNMENT 

tion,  paid  by  the  company.  The  Secretary,  Mr.  Bert 
Hall,  previously  a  popular  social  worker  in  the  town, 
began  by  arranging  definite  and  regular  days  off  for 
trainmen,  so  that  they  could  make  and  keep  appoint- 
ments instead  of  being  called  back  at  will  of  the  man- 
agement if  there  happened  to  be  a  shortage  of  train- 
men. 

A  large  number  of  the  men  were  in  debt,  and  gar- 
nishments were  coming  in  at  the  rate  of  twenty  or 
twenty-five  every  pay-day.  The  Secretary  circularized 
practically  all  of  the  attorneys,  collection  agencies,  in- 
stallment houses,  asking  them  to  send  the  bills  to  him 
and  keep  the  cases  out  of  court.  The  company  was 
induced  to  start  a  loan  office,  confidential  conferences 
were  held  with  men  in  debt,  no  interest  was  charged 
on  loans,  and  now  there  are  almost  no  garnishment 
actions.  The  Secretary  is,  in  fact,  a  legal  aid  society. 
Threatened  divorce  suits  are  averted.  Wives  bring 
to  him  their  grievances  about  sharing  their  husband's 
wages.  Even  neighborhood  quarrels  get  into  his  of- 
fice. The  point  is,  the  men  are  better  workers  when 
not  worried  by  debts,  courts  and  domestic  troubles. 

Two  years  passed.  Additional  life  insurance,  up 
to  $2,000,  was  then  offered  to  members  at  cost.  Acci- 
dent insurance  while  on  duty  is  cared  for  by  the  state 
compensation  law,  and  does  not  come  under  the  Asso- 
ciation. But  sickness  and  accidents  off  duty  were  now 
provided  with  benefits  additional  to  those  mentioned 
above,  at  the  actual  additional  cost  of  the  risk,  up  to 
$120  per  month,  as  the  member  might  wish.  Even 
accidents  on  duty  may  be  insured  by  a  member  at  cost, 
in  addition  to  what  the  state  requires  the  company  to 
pay.     Medical  and  hospital  services  for  sickness  and 


FROM  WELFARE  TO  DEMOCRACY    149 

accidents  off  duty  are  provided  free  out  of  the  funds 
of  the  Association. 

Another  change  was  made  in  the  articles  of  incor- 
poration. The  employees  were  given  thirteen  and  the 
company  eleven  members  on  the  Board  of  Directors, 
each  with  one  vote  on  amendments  to  the  by-laws  and 
other  matters,  except  the  benefits.  A  change  in  bene- 
fits requires  a  two-thirds  vote,  and,  in  order  to  give 
the  employees  control  of  the  "additional"  benefits 
which  they  alone  pay  for,  the  vote  of  each  company 
director  counts  only  59/1  cx)  of  a  vote.  But,  on  the 
"regular"  benefits,  to  which  the  company  contributes 
one-half,  it  is  one-member-one-vote. 

The  free  medical  service  was  not  getting  the  results 
hoped  for.  It  had  been  installed  on  the  assumption 
that  employees  would  go  to  the  doctor  at  the  central 
building.  But  many  did  not.  The  average  loss  of 
working  time  on  account  of  sickness  was  nine  or  ten 
days  per  year  per  employee.  But  while  they  forgot 
to  consult  the  doctor  they  did  not  forget  the  sick  bene- 
fits. Thousands  of  dollars  were  being  paid.  The  ques- 
tion was.  How  to  prevent  sickness  and  how  to  get 
prompt  attention  when  not  prevented. 

The  Board  of  Directors  experimented,  tried  various 
plans,  discussed  the  matter  at  great  length.  Finally 
they  evolved  this :  A  doctor's  office  is  opened  at  every 
place  where  the  4,000  employees  go  to  work,  including 
the  cities  of  Racine,  Kenosha,  Waukesha  and  Water- 
town,  where  the  company's  lines  extend.  Assistant 
doctors  are  stationed  there.  A  man  cannot  go  to  work 
without  passing  the  doctor.  Superintendents  and  fore- 
men are  instructed  to  watch  for  men  who  seem  to  be 
under  the  weather.    A  man  with  a  cold,  or  a  headache, 


150  INDUSTRIAL  GOVERNMENT 

or  a  touch  of  rheumatism,  does  not  put  off  going  to 
the  doctor.  If  he  does  not  show  up  and  reports  him- 
self sick — which  report  is  his  claim  for  benefits — he  is 
visited  at  once  by  some  one  from  the  Secretary's  office. 
He  is  asked,  "Do  you  want  the  Association  physician?" 
If  he  does,  the  physician  comes.  If  not,  he  gets  an- 
other. An  Association  nurse,  and  medical  supplies, 
are  sent  if  needed.  There  is  a  complete  X-Ray  outfit 
at  the  central  office. 

At  the  end  of  the  first  year  the  time  lost  on  account 
of  sickness  was  reduced  35.8  per  cent,  and  the  average 
is  now  only  four  or  five  days  instead  of  nine  or  ten. 
It  can  easily  be  estimated  how  much  more  money  is 
earned  by  4,000  men  who  increase  their  working  days 
four  or  five  a  year.  It  is  much  more  than  their  dues 
of  $6  a  year.  During  19 19  there  were  15,542  of  these 
office  calls,  2,167  house  visits,  and  96  surgical  opera- 
tions for  members. 

The  close  attention  to  prevention  of  sickness  of  em- 
ployees revealed  the  fact  that  sickness  in  the  family 
was  a  cause  of  absenteeism,  of  inefficient  work,  of  ac- 
cidents. Moreover,  the  savings  effected  by  preventing 
sickness  showed  themselves  in  a  big  surplus  in  the  As- 
sociation treasury.  Evidently  free  medical  attendance 
should  be  extended  to  the  wives  and  children  of  em- 
ployees. This  was  done  in  19 16.  Additional  nurses 
were  added.  The  doctor  and  nurse  at  the  house  enable 
the  man  to  be  at  work.  In  1919  there  were  2,156  office 
calls  of  wives  and  dependents,  6,240  home  visits  for 
them  and  181  surgical  operations.  The  value  of  the 
services  rendered  to  families  was  $41,218.  And  the 
dues  remain  where  they  were — $6  a  year.     Naturally 


FROM  WELFARE  TO  DEMOCRACY   151 

the  wives  of  employees  have  formed  the  Women's 
Auxiliary  of  the  E.  M.  B.  A. 

A  conductor  on  the  street  car  told  us  what  he 
thought  of  the  E.  M.  B.  A.  It  saved  him  $50  week 
before  last.  At  another  time  his  little  girl  had  ade- 
noids. The  Association  surgeon  removed  them,  and 
"it  didn't  cost  me  a  penny."  His  boy  needed  an  oper- 
ation. He  had  arranged  for  it  the  next  week.  "The 
free  medical  service  will  save  me  $100  this  year." 

From  the  standpoint  of  the  doctor  this  development 
of  social  insurance  with  industrial  medicine  and  sur- 
gery has  brought  a  decided  change  of  front.  Dr.  C.  H. 
Lemon,  the  Chief  Surgeon  of  the  company,  has  com- 
mented on  it.  It  is  a  change  from  Individual  to  Group 
Medicine,  and  from  Cure  to  Prevention. 

If  the  relation  between  the  physician  and  the  family 
becomes  unsatisfactory,  in  ordinary  practice,  the  rela- 
tion is  easily  terminated.  Another  patient  comes  to 
the  doctor,  and  the  former  relation  is  perfectly  balanced 
without  prejudice  to  either.  But  both  the  family  and 
the  association  of  families  within  the  corporation  are 
a  group.  If  the  relation  between  physician  and  patient 
now  becomes  unsatisfactory,  the  entire  group  becomes 
an  interested  party.  The  man  higher  up  must  be  dealt 
with,  and  he  is  the  General  Manager,  who  is  person- 
ally interested  in  the  welfare  of  all  his  employees.  The 
doctor  must  make  good  to  all  and  not  expect  to  ad- 
vance with  some  patients  if  he  fails  with  others, 

"From  the  standpoint  of  health,"  says  Dr.  Lemon, 
"the  group  plan  has  many  advantages.  A  service 
which  can  be  had  for  the  asking,  will  be  used  effectively. 
Men  are  curious  to  know  what  ails  them,  and  this 
curiosity  can  be  satisfied  if  no  extra  expense  is  incurred 


152  INDUSTRIAL  GOVERNMENT 

in  the  investigation.  And  why  should  not  this  be  so? 
If  medicine  is  of  any  use  whatever,  its  greatest  use- 
fulness should  be  the  seeking  out  of  blind  disorders 
and  remedying  them  before  they  have  become  danger- 
ous factors  in  a  man's  life.  Preventive  medicine, 
therefore,  finds  its  highest  application  in  the  group 
form  of  medical  service." 

In  191 5  the  company  established  a  profit-sharing, 
or  rather,  efficiency-sharing  plan.  The  employees  elect 
a  bonus  committee  for  each  department.  The  em- 
ployee, dissatisfied  with  his  bonus,  gets  his  bonus  com- 
mittee to  ask  for  a  review  and  adjustment. 

Take  the  transportation  department.  From  its 
records  for  several  years  the  company  determined  a 
set  of  operating  cost  standards.  If  the  employees  keep 
the  actual  costs  below  this  standard,  they  share  one- 
half  the  saving  with  the  company.  There  are  five  fac- 
tors in  the  bonus. 

1.  Injuries  and  damages  are  expressed  in  per  cent 
of  operating  revenues.  This  percentage  had  been  fairly 
constant,  and  was  taken  as  the  standard.  If  the  men 
keep  the  amount  of  damages  below  that  standard,  the 
difference  is  profits  to  be  shared. 

2.  The  speed  factor  is  expressed  in  trainmen-wages 
per  car-mile.  If  the  trainmen  keep  up  their  schedules, 
which  are  fixed  below  the  standard  of  speed,  they  get 
a  corresponding  profit  in  terms  of  cents  per  car-mile. 

3.  Maintenance  of  equipment  factor  is  based  on  a 
standard  cost  for  wrecks,  fare-box  and  glass  mainte- 
nance in  so  far  as  directly  controlled  by  the  men, 
expressed  in  cents  per  car-mile. 

4.  Operating-revenue  factor  is  expressed  in  cents 
per  car-mile  excess  over  a  standard  revenue.    The  cents 


FROM  WELFARE  TO  DEMOCRACY    153 

per  car-mile  gained  above  the  standard  multiplied  by 
the  actual  car-miles  per  month  gives  the  gross  profit 
for  the  month. 

5.  Power-coasting :  the  skilled  motorman  who  shuts 
off  power  when  he  can  coast  saves  electrical  energy. 
There  are  seventeen  different  standards,  of  which  seven 
apply  to  recording  meters  and  ten  to  coasting  clocks. 
The  meters  give  the  kilowatt-hours  and  the  coasting 
clocks  the  time  for  coasting.  The  saving  is  computed 
in  terms  of  gross  profits. 

With  these  standards  established,  the  trainman  be- 
gins each  month  with  a  credit  of  1,000  merit  points. 
Schedules  of  demerits  have  been  arranged.  The  total 
demerits  for  the  month  are  subtracted  from  1,000. 
An  employee  is  disqualified  for  profits  if  his  demerits 
for  the  month  are  250  or  more.  At  the  end  of  the 
month  the  grade  points  of  those  with  751  or  more 
points  are  added,  the  employee's  share  of  the  gross 
profits  is  divided  by  this  sum,  and  the  unit  thus  ob- 
tained, multiplied  by  the  individual's  points,  gives  his 
share. 

For  November  and  December,  1918,  ninety-nine  per 
cent  of  the  trainmen  shared  the  bonus.  The  average 
bonus  for  1918  was  $11.18  per  month.  The  maximum 
was  equivalent  to  4.2  cents  per  hour,  the  minimum 
3.15  cents. 

The  company  then  introduced  old-age  pensions.  An 
employee  sixty  years  of  age,  in  the  service  of  the  com- 
pany fifteen  years  or  longer  is  permitted  to  retire  on 
pension  for  the  rest  of  his  life.  At  the  age  of  seventy, 
with  continuous  service  fifteen  years  or  longer,  the 
company  retires  him.  If,  by  misfortune,  an  employee 
is  incapacitated  just  preceding  the  time  for  his  retire- 


154  INDUSTRIAL  GOVERNMENT 

ment,  he  is  granted  a  pension  for  fourteen  years.  One 
and  one-half  per  cent  of  the  annual  average  wage  for 
the  past  ten  years  multiplied  by  the  number  of  years 
of  continuous  service  of  the  employee,  gives  the  amount 
of  the  annual  pension.  No  pension  falls  below  a  mini- 
mum of  $240  nor  exceeds  a  maximum  of  $750.  In 
July,  19 19,  the  administration  of  this  pension  was 
turned  over  to  the  E.  M.  B.  A.  The  company  has 
obligated  itself  to  the  Association  to  continue  its 
financial  support  up  to  an  amount  equal  to  one-fourth 
of  one  per  cent  of  the  total  operating  revenues  per 
annum. 

We  now  come  to  the  Labor  Agreement  of  April, 
19 1 8,  by  which  the  company  granted  the  right  of  col- 
lective bargaining  and  gave  the  E.  M.  B.  A.  super- 
vision over  employment  and  the  employment  bureau. 
The  company  agreed  to  employ  thereafter  only  persons 
who  "indicate  their  willingness  to  become  members  of 
the  Association."  The  employment  manager  is  hired 
by  the  company.  Prior  to  this  agreement  the  member- 
ship ranged  from  2,500  to  2,900.  Now  it  is  over 
4,000. 

Under  the  direction  of  the  E.  M.  B.  A.  the  Employ- 
ment Bureau  has  prepared  trade  tests,  by  which  a 
man's  fitness  for  a  job  is  determined  before  sending 
him  on  to  the  foreman.  Such  careful  selection  will 
reduce  turnover.  This  is  quite  a  considerable  task 
here,  since  there  are  179  different  trades.  Another 
task,  that  of  finding  the  causes  of  "quits"  and  dis- 
charges, is  investigated.  What  is  going  on  here  is  a 
centralization  of  power  in  the  Employment  Office. 
Employees  demand  security  of  employment.  They 
have  no  business  agent,  like  the  trade  unions,  to  look 


FROM  WELFARE  TO  DEMOCRACY    155 

after  their  interests  in  this  vital  matter,  but  they  have 
the  Employment  Bureau. 

The  influence  of  the  Association  shows  itself  again 
in  the  work  to  combat  the  high  cost  of  living.  Thou- 
sands of  dollars'  worth  of  food  and  clothing  have  been 
bought  and  sold  to  members  at  wholesale  prices.  The 
Women's  Auxiliary  handles  the  sales.  A  building  and 
loan  association  is  another  feature. 

Finally  "collective  bargaining."  It  came  about  in 
this  way — not  the  usual  kind,  but  an  Industrial  Tri- 
angle— the  E.  M.  B.  A.,  the  company  and  the  state  of 
Wisconsin. 

In  April,  1918,  the  E.  M.  B.  A.  began  a  demand  for 
more  wages.  The  company  acknowledged  it  but  plead 
financial  inability  until  the  state  Railroad  Commission 
should  increase  its  revenues  by  raising  the  street  car 
fares.  The  employees  sent  their  committee  to  the 
State  Commission.  It  declined  to  fix  wages,  having  no 
legal  power  to  do  so,  and  sent  the  committee  back  to 
the  company.  Before  the  matter  was  cleared  up,  the 
Governor  of  the  state,  the  Legislature,  the  Socialist 
administration  of  Milwaukee,  and  a  one-day  strike 
came  into  the  melee. 

The  company,  in  April,  19 18,  in  granting  to  the 
employees  control  over  the  Employment  Bureau, 
granted  them  the  right  to  bargain  collectively  through 
committees  of  their  own  choosing.  This  added  a 
Labor  Adjustment  Committee  to  each  of  the  thirteen 
departments  of  the  company,  composed  of  two  em- 
ployees elected  for  the  purpose  and  the  employee  Di- 
rector from  that  department.  The  Labor  Adjustment 
Committee  of  the  Transportation  Department  de- 
manded the  eight-hour  day  and  fifteen  cents  an  hour 


156  INDUSTRIAL  GOVERNMENT 

increase.  Motormen  and  conductors  were  getting 
twenty-five  to  thirty-two  cents  per  hour.  The  Rail- 
road Commission  told  the  employees  in  May,  1918,  that 
it  would  not  fix  wages  but  would  provide  for  a  reason- 
able increase  in  wages  when  it  fixed  the  street  car 
fares.  Finally  in  June  the  decision  came,  granting 
fares  estimated  to  bring  $800,000  increased  revenues 
to  the  company.  This  took  care  of  a  ten  per  cent  in- 
crease in  wages. 

In  July  the  employees  were  clamoring  for  more 
wages.  The  company  replied  as  before.  Men  were 
leaving  for  war  industries,  but  the  majority  hesitated. 
The  Association  member  who  left  sacrificed  his  sick- 
ness insurance,  his  free  medical  service,  his  life  in- 
surance, his  old-age  pension,  and  his  rights  to  purchase 
benefits,  commodities  and  homes  at  cost.  Yet  enough 
left  to  seriously  embarrass  the  street  car  service.  Two 
more  meetings  were  held  with  the  State  Commission. 
The  Commission  granted  increases  in  rates  on  elec- 
tricity and  heating  furnished  by  the  company,  but  not 
on  transportation.  The  E.  M,  B.  A.  engaged  account- 
ants to  go  over  the  books  of  the  company.  A  state 
commissioner  intimated  to  the  committee  that  the 
company  was  dodging  the  increase  in  wages.  Then 
the  E.  M.  B.  A,  demanded  an  increase  of  eight  cents 
per  hour  and  gave  the  company  nine  days  to  reply. 
Meanwhile,  their  accountants  reported  the  company 
financially  unable  to  pay.  The  report  was  submitted 
to  the  State  Commission  at  two  more  conferences. 
The  Commission  replied  as  before.  It  was  a  rate-fixing 
body  and  not  a  managerial  or  wage-bargaining  body. 
The  Governor  was  brought  in  and  tried  to  arrange 


FROM  WELFARE  TO  DEMOCRACY    157 

another  meeting  with  the  Commission.  The  Com- 
mission decHned, 

Then  the  E.  M.  B.  A.  resolved  to  strike.  The  de- 
mand was  changed  from  eight  cents  to  four  cents  an 
hour.  The  strike  lasted  one  day.  The  Secretary  of 
the  E.  M.  B.  A.  "struck"  with  the  members.  The 
company  granted  the  four  cents  increase. 

Then  came  the  legislative  investigation.  The  legis- 
lature created  an  Arbitration  Board  for  public  utility 
disputes.  The  Board  is  a  kind  of  annex  to  the  Railroad 
Commission.  It  submits  its  award  to  the  Commission 
for  approval,  and  within  forty-five  days  the  Commis- 
sion must  render  its  decision  on  increased  revenues. 
In  August,  1 919,  the  Board  awarded  forty-eight  cents 
per  hour  to  trainmen,  up  to  fifty-five  cents  for  those 
with  five  or  more  years'  service,  and  a  working  day 
of  nine  hours.  The  Railroad  Commission  approved 
and  car-riders  in  Milwaukee  began  paying  six  cents 
instead  of  five  cents. 


XIV 

FROM  SCIENTIFIC   MANAGEMENT   TO 

UNIONISM 

"The  Plimpton  Press  now  deals  with  the  union 
organizations  and  no  essential  difference  exists  be- 
tween them;  and  the  unions  are  anxious  to  assist  the 
management  of  the  Plimpton  Press  in  developing  the 
greatest  productivity  based  on  the  fundamental  prin- 
ciple that  the  health  and  well-being  of  the  employees 
in  their  joint  relation  to  the  Plimpton  Press  and  the 
unions  is  the  largest  single  factor  in  the  solvency  of 
the  concern." 

The  idea  of  good -will  in  an  industry  has  sel- 
dom been  put  more  strongly  than  in  this  statement 
from  the  agreement  between  the  Plimpton  Press  and 
the  four  great  international  unions  whose  members  it 
employs. 

The  Plimpton  Press,  of  Norwood,  Mass.,  is  one  of 
the  few  concerns  in  the  country  which  can  offer  an 
answer  to  three  questions  which  are  of  great  interest 
to  the  public  and  to  industry.  Can  scientific  manage- 
ment operate  to  advantage  in  a  union  shop?  What 
effect  does  scientific  management  have  upon  union  em- 
ployees? What  effect  do  unions  have  upon  scientific 
management  ? 

For  convenience  let  us  answer  the  third  question 
first.     The  Taylor  system  was  in  operation  at  the 

158 


SCIENTIFIC  MANAGEMENT  159 

Plimpton  Press  when  that  concern  became  a  preferen- 
tial union  shop.  The  attack  of  the  International  unions 
was  concentrated  on  one  feature — the  task  and  bonus 
system  of  wage  payment,  with  its  accompanying  fea- 
ture, the  time  study.  In  spite  of  the  fact  that  those 
union  representatives  who  were  actually  employed 
under  this  system  voted  in  favor  of  its  retention,  and 
that  the  only  Plimpton  Press  employees  who  voted  to 
abolish  it  were  themselves  piece  workers  and  not  af- 
fected by  the  change,  the  Internationals  succeeded  in 
carrying  their  point.  The  task  and  bonus  gave  way 
to  a  straight  day  wage. 

When  the  task  and  bonus  system  was  In  use,  each 
job  ticket  issued  by  the  Planning  Room  showed  the 
standard  or  bonus  time,  and  the  additional  amount 
which  would  be  earned  by  the  worker  if  the  job 
were  completed  in  that  time.  Since  the  abolition  of 
the  bonus,  the  ticket  which  goes  to  the  worker  does 
not  show  this  standard  time,  but  the  duplicate  ticket 
kept  in  the  Planning  Room  still  shows  it.  Although 
the  company  and  the  unions  agreed  on  doing  away  with 
the  setting  of  a  time  and  the  payment  of  a  bonus  for 
meeting  the  time,  the  company  keeps  records  of  in- 
dividual performance,  paying  the  union  rate  as  a  mini- 
mum and  adding  a  premium  rate  to  those  whose  previ- 
ous records  show  an  output  which  warrants  it.  A 
considerable  number  of  the  employees  at  the  Plimpton 
Press  are  receiving  premium  rates- — that  is,  more  than 
the  union  scale.  If  a  normally  skillful  and  intelligent 
worker  is  not  able  to  bring  up  his  grade  to  the  normal 
performance,  he  is  tried  out  upon  other  work.  Usually 
he  can  be  shifted  to  some  department  where  he  can 
^  bring  up  his  production. 


i6o  INDUSTRIAL  GOVERNMENT 

The  company  still  finds  the  time  study  essential  in 
making  estimates  for  contracts,  in  planning  the  work, 
in  establishing  a  basis  for  grading  employees  and  in 
fixing  certain  piece  rates  which  will  be  discussed  later. 

Employees  on  certain  work  are  very  doubtful  about 
the  value  of  the  time  study  for  any  of  these  purposes, 
so  far  as  their  own  work  is  concerned. 

"How  in  the  world,"  they  say,  "can  you  make  a 
time  study  for  a  proofreader  or  a  printer?  Here  is 
an  author  whose  manuscript  is  a  mess  of  typewriting, 
handwriting  and  hieroglyphics  of  all  kinds.  Here  is 
another  who  sends  in  pages  so  neat  and  clear  that  it 
is  a  joy  to  go  through  them.  One  chap  keeps  sending 
in  changes  and  causing  all  kinds  of  trouble.  Then 
there  is  a  book  with  pages  and  pages  of  tables,  and 
another  with  just  as  many,  but  entirely  different  kinds 
of  tables.  The  only  way  you  can  make  a  time  study 
of  these  things  is  to  do  all  the  work.  And  when  you 
have  it  done  you  have  a  record  of  performance,  but 
nothing  to  go  by  for  the  future.  How  can  there  be 
any  sense  or  reason  in  making  a  time  study  when  you 
aren't  going  to  have  any  more  objects  like  the  one 
measured?  Even  if  you  have  an  industry  where  the 
raw  material  and  the  product  are  standardized,  the 
time  study  still  is  inaccurate.  You  cannot  standardize 
the  weather,  domestic  troubles  or  the  health  of  the 
worker." 

On  the  other  hand,  even  those  employees  who  see 
little  value  in  the  time  study  agree  with  the  company 
that  there  is  considerable  merit  in  the  system  of  grad- 
ing on  the  basis  of  production.  "It  is  all  right  to  pay 
more  to  those  who  show  steadily  high  production  over 
a  considerable  period  of  time.     That  is  not  the  same 


SCIENTIFIC  MANAGEMENT  i6i 

as  holding  the  hope  of  a  bonus  over  the  head  of  the 
worker,  constantly  tempting  him  to  strain  himself  to 
the  breaking  point  every  minute  of  the  day,  and  creat- 
ing a  nervous  tension  which  results  in  the  long  run  in 
a  shortened  period  of  productivity." 

The  straight  hourly  rate  has  been  adopted  in  all 
except  one  department — the  book  bindery.  Here  the 
straight  piece  rate  remains  on  three  of  the  thirty-odd 
operations.  The  policy  of  the  International  Brother- 
hood of  Bookbinders  is  opposed  to  piece  work,  but  the 
binders  themselves  seem  loath  to  part  with  it.  Indi- 
vidual workers  in  the  shop  may  be  opposed  to  it,  but 
the  existence  of  piece  work  here,  or  in  any  New  Eng- 
land shop,  is  due  to  the  fact  that  the  local  binders  them- 
selves are  overwhelmingly  in  favor  of  it.  The 
Internationals  are  trying  to  educate  their  members 
away  from  the  piece  work  system,  but  it  seems  to  be 
a  long,  slow  process. 

There  is  no  complaint  here  of  decreasing  produc- 
tivity of  employees.  Apparently  neither  the  company 
nor  the  people  are  consciously  trying  to  decrease  or 
to  increase  output.  "No  one  can  tell  me  that  workers 
in  general  are  shirks,"  said  a  member  of  one  of  the 
planning  departments.  "They  are  not.  If  the  work 
is  ready  for  them,  they  do  it.  Much  of  the  blame 
laid  by  uninformed  people  on  the  workers  does  not 
belong  there.  The  trouble  in  many  factories  is  that 
the  worker  sometimes  has  to  wait  too  long  for"  his 
work,  or  he  has  to  go  all  over  the  place  to  find  his 
work  and  tools,  or  he  may  even  have  to  go  home  for 
lack  of  work.  Sometimes  a  piece  of  work  may  have 
been  given  to  too  high  priced  a  workman.  Sometimes 
the  estimate  and  the  contract  may  have  been  too  low." 


i62  INDUSTRIAL  GOVERNMENT 

But  none  of  this  occurs  at  the  Plimpton  Press. 
Scientific  management  saves  the  Plimpton  Press  from 
all  such  causes  of  low  productivity.  The  aim  here  is 
to  avoid  all  delay  by  having  everything  ready  for  the 
worker  and  by  bringing  it  to  him  at  the  right  time. 
The  work  is  laid  out  for  him  two  weeks  ahead  of  time. 
It  is  all  laid  out  in  the  three  planning  departments — the 
one  for  the  composing  room,  the  one  for  the  press 
room,  and  the  one  for  the  bindery.  Instead  of  a 
"group  boss"  or  straw  boss,  there  are  production  in- 
structors over  every  group  of  ten  or  twelve  persons. 
There  are  practically  no  foremen  of  the  old  type. 
Over  the  production  instructors  are  the  production 
clerks  of  the  planning  department.  The  salesmen  are 
brought  into  the  routine  of  the  planning  department. 
Whenever  they  want  rush  orders,  the  planning  de- 
partment makes  them  take  the  responsibility  for  going 
over  all  the  orders  and  making  arrangements  to  put 
off  certain  ones  in  favor  of  the  orders  being  rushed. 

"It  is  perfectly  natural,"  said  one  of  the  managerial 
force,  "that  the  worker  should  slacken  up  in  rush  times 
and  try  to  make  the  job  last.  We  have  to  expect  that 
in  industry  until  unemployment  is  abolished.  Our 
industry  used  to  be  highly  seasonal,  but  we  are  grad- 
ually making  it  more  regular.  Our  salesmen  are  try- 
ing through  the  publishers  to  influence  schools  to  adopt 
their  text-books  before  Christmas  for  the  next  year 
so  as  to  avoid  the  rush  in  the  late  summer  and  early 
fall.  With  the  consent  of  the  unions,  we  use  high 
school  girls  and  boys  to  take  up  some  of  the  rush  work 
during  the  summer  vacation.  Occasional  rushes  dur- 
ing the  year  we  meet  partially  by  having  former  women 
employees  come  for  part-time  work," 


SCIENTIFIC  MANAGEMENT  163 

This  part-time  work,  according  to  certain  represen- 
tatives of  the  company,  is  not  necessarily  disadvan- 
tageous. The  person  who  comes  in  fresh  for  a  few 
hours  of  work,  which  is  a  change  from  the  routine  of 
housework,  often  does  better  work  after  a  Httle  prac- 
tice than  the  person  who  stays  all  day.  Shorter  hours 
in  general  are  desirable.  On  certain  kinds  of  work, 
employees  should  certainly  not  be  left  all  day.  People 
who  may  be  able  to  endure  a  few  hours  each  day  at 
certain  kinds  of  heavy  or  monotonous  work  with  no 
ill  effects  may  be  permanently  injured  by  keeping  at 
it  continually.  The  change  in  work  may  not  suit  the 
worker  at  first,  and  over  a  period  of  a  few  months  a 
loss  in  efficiency  may  occur,  but  over  a  long  period 
of  years,  the  results  will  be  better  from  both  points 
of  view. 

The  printing  business  offers  many  varieties  and 
grades  of  work.  There  is  apparently,  so  far  as  prepa- 
ration and  training  go,  a  vast  stretch  between  the  girl 
who  folds  the  pages  in  the  bindery  department  and 
the  cultured  proofreader  of  Greek  and  Hebrew.  But 
both  have  the  real  trade  union  fighting  spirit,  as  their 
wages  attest.  Experienced  women  piece  workers  claim 
that  they  can  easily  make  $25  to  $27  a  week.  They 
have  secured  large  increases  during  the  past  year  and 
are  working  energetically  to  raise  the  scale  for  women 
to  a  point  that  will  bring  their  wage  up  to  that  of  the 
men. 

Among  the  skilled  employees,  both  men  and  women 
— the  same  employees  who  are  looking  out  most  ac- 
tively for  their  own  interests — are  many  who  show  a 
great  interest  in  their  work  itself.  They  have  a  grati- 
fying sense  of  their  own  value  to  the  industry.    They 


i64  INDUSTRIAL  GOVERNMENT 

believe  that  if  the  company  saw  fit  to  utilize  fully  their 
information  and  ability  they  could  render  greater  con- 
tributions than  they  now  do.  They  could  give  good 
advice,  for  example,  when  contracts  are  being  let — 
advice  more  dependable,  they  think,  than  time  studies. 
As  a  matter  of  fact,  they  do  offer  their  suggestions 
through  an  elected  production  committee  which  dis- 
cusses various  matters  with  the  management. 

We  started  with  three  questions.  We  think  that 
we  have  practically  answered  them  all.  Scientific  man^- 
agement  and  the  unions  can  and  do  exist  together  here. 
To  be  sure  the  task  and  bonus  have  gone  and  this, 
according  to  the  ideas  of  some  people,  spells  the  end 
of  scientific  management  at  the  Plimpton  Press.  But 
we  do  not  think  so.  Neither  does  the  management  of 
the  Plimpton  Press.  Neither,  it  appeared  to  us,  do 
the  employees. 

The  scientific  management  which  exists  and  is  de- 
veloping at  the  Plimpton  Press  is  the  scientific  man- 
agement of  cooperation  between  two  groups  of  partners 
who  have  practically  equal  power  and  consequently 
equal  interest  in  production.  If  this  were  the  only 
union  plant  which  we  had  visited,  we  might  be  inclined 
to  conclude  that  it  is  the  careful  planning — a  scientific 
management  feature  which  has  survived  the  coming 
of  the  unions — and  the  grading  system  of  wage  pay- 
ment, which  have  kept  up  production,  and  have  won 
over  the  employees  to  an  interest  in  production.  But 
the  fact  is  that  we  have  found  production  keeping  up 
in  the  union  shops  where  no  formal  system  of  scientific 
management  has  ever  been  installed.  Perhaps,  then, 
some  credit  needs  to  be  given  to  the  union  itself. 

The  unions  involved  here  are  a  part  of  one  of  the 


SCIENTIFIC  MANAGEMENT  165 

most  complete  developments  of  industrial  government 
in  this  country.  The  four  great  international  craft 
unions  of  the  Printing  and  Publishing  business — the 
Typographical,  the  Pressmen,  the  Stereotypers  and 
Electrotypers — and  the  Bookbinders,  while  each  reserv-^ 
ing  complete  autonomy  within  the  craft,  have  been 
organized  into  the  International  Allied  Printing  Trades 
Association.  The  local  unions  of  each  international 
are  likewise  federated  into  local  Allied  Printing  Trades 
Councils.  The  employers  likewise  have  a  national  and 
local  organization,  known  as  the  Typothetse. 

It  is  the  Allied  Printing  Trades  Council  of  Greater 
Boston  with  which  the  local  unions  represented  in  the 
Plimpton  Press  are  affiliated.  The  Plimpton  Press 
makes  its  agreement  as  to  hours  of  work  and  condi- 
tions with  the.  Boston  Allied  Printing  Trades  Council, 
and  its  wage  agreement  with  each  one  of  the  local 
unions.  As  the  members  of  the  scale  committee  are 
elected  from  the  locals  and  not  from  the  shops  them- 
selves, the  Plimpton  Press  may  not  be  represented 
strongly,  if  at  all,  on  the  scale  committee.  The  scale 
is  submitted,  however,  to  the  local  unions,  and  voted  on 
by  them. 

Questions  arising  at  the  Plimpton  Press  concerning 
the  agreement  or  concerning  working  conditions,  may 
be  settled,  and  often  are,  by  negotiation  between  the 
labor  manager  and  the  individual  concerned,  or  by  the 
labor  manager  and  the  business  agent  of  the  union, 
or  by  the  labor  manager  and  a  shop  committee  selected 
for  the  purpose.  If  this  method  fails,  the  dispute  goes 
to  Boston,  fifteen  miles  away,  to  the  Joint  Board  of 
Employers  and  the  Allied  Printing  Trades.  If  they 
fail  to  reach  an  agreement,  the  parties  resort  to  arbi- 


i66  INDUSTRIAL  GOVERNMENT 

tration.  The  union  chooses  one  member,  the  company 
chooses  one,  and  the  two  members  select  a  third  mem- 
ber of  a  board  of  arbitration,  the  decision  of  which  is 
binding  on  both  parties. 

Only  one  of  the  unions  has  a  permanent  shop  com- 
mittee in  the  factory.  Among  the  employees  numerous 
temporary  committees  are  elected  as  occasion  arises 
to  present  to  the  management  whatever  any  group  de- 
sires to  bring  up.  Each  committee  is  elected  for  a 
special  purpose  and  when  it  has  served  that  purpose  its 
life  ends.    There  is  no  local  assembly  and  no  court. 

Is  the  production  morale  in  the  Plimpton  Press  kept 
up  in  the  last  analysis,  then,  by  the  existence  of  an 
efficient  planning  department  ?  Or  is  it  the  knowledge 
of  every  worker  that  back  of  him  are  powerful  organi- 
zations ready  to  support  him  in  every  move  to  retain 
or  to  secure  his  fair  share  of  the  product?  Or  is  it 
due  partly  to  the  recognition  by  the  company  that  it 
is  the  right  of  their  employees  to  satisfy  their  elemen- 
tary desires  for  safe  hours,  American  wages,  steady 
employment  and  treatment  in  keeping  with  their  dig- 
nity and  self-respect?  Is  it  due  to  the  strong  person- 
alities in  the  management — among  whom  are  found 
one  of  the  Joint  Chairmen  of  the  International  Joint 
Conference  Council  of  the  Allied  Printing  Trades  and 
the  Typothetse — a  man  who  is  known  in  Boston  and 
among  employers  throughout  the  country  as  a  friend 
of  the  workers  in  their  orderly  progress  toward  de- 
mocracy and  prosperity?  To  what  extent  is  it  due  to 
the  very  unusual  type  of  labor  manager — a  woman 
who  combines  a  thorough  knowledge  of  the  industry 
with  a  sympathetic  understanding  of  the  employees  and 
a  love  for  efficiency  and  democracy? 


SCIENTIFIC  MANAGEMENT  167 

All  of  these  things  must  undoubtedly  have  their 
influence.  Just  how  much  credit  should  be  attributed 
to  each  factor  is  something  we  cannot  measure.  Cer- 
tain it  is,  however,  that  a  fundamental  experiment  is 
being  worked  out  here.  Orderly  industrial  government 
and  efficient  production  exist  here  not  as  a  result  of 
overwhelming  authority  on  one  side,  but  as  the  result 
of  balanced  power,  of  reason  and  knowledge  on  both 
sides.  The  same  scientific  spirit  which  prompts  the 
Allied  Printing  Trades  and  the  Typothetae  to  the  joint 
employment  of  research  workers  to  present  unbiased 
facts  for  consideration  in  negotiations  is  shown  here 
in  the  relation  between  employers  and  employees  of 
the  Plimpton  Press. 

Have  we  not  here  in  process  of  development  a  scien- 
tific management  broader  and  more  fundamental  than 
the  older  form  of  wage  system  which  has  been  abol- 
ished ?  When  we  find  employer  and  employee  together 
gathering  facts  for  their  negotiations,  when  we  find 
both  recognizing  that  tremendous  possibilities  may 
exist  in  the  capacity  of  employees  to  interest  themselves 
in  the  problems  of  production,  when  we  find  both  sides 
going  along  steadily  and  patiently,  willing  to  give  new 
things  a  trial  ajid  yet  not  trying  to  force  premature 
developments  and  experiments ;  then  we  feel  that  surely 
this  is  truly  scientific  management — scientific  manage- 
ment based  upon  a  democracy  as  sober,  as  dignified, 
and  as  solid  as  New  England  tradition. 


XV 
STANDARDIZATION  AND  STABILIZATION 

THE  INTERNATIONAL  JOINT  CONFERENCE  COUNCIL 

The  book  and  job  printing  industry,  like  other  in- 
dustries, faced  a  serious  labor  crisis  during  the  period 
following  the  war.  Business  was  good  but  it  was  im- 
possible to  get  production.  Scarcity  of  workers  and 
apprentices  resulted  in  a  high  labor  turnover.  Local 
unions  broke  their  contracts  and  forced  up  wages  by 
"direct  action,"  thus  demoralizing  competition.  The 
ranks  of  both  employers  and  employees  were  disorgan- 
ized. Stealing  of  labor  was  in  common  practice.  In 
the  large  centers  conservative  trade  unionists  had  lost 
control  and  were  supplanted  by  radical  leaders  who 
flouted  the  disciplinary  powers  of  the  internationals. 
Some  employers  went  far  ahead  of  the  game  and  met 
the  problem  by  tempting  labor  with  better  wages  and 
better  conditions  than  employees  had  anticipated.  But 
the  printing  industry  had  something  that  the  other 
industries  did  not  have.  It  had  four  national  strongly 
organized  groups  of  closed  shop  employers  who  were 
accustomed  to  deal  with  labor  along  constitutional  lines 
and  it  had  five  intelligent  American  trade  unions,  organ- 
ized to  act  together  in  the  International  Allied  Printing 
Trade  Association. 

Almost  simultaneously,  these  two  groups  recognized 

168 


STANDARDIZATION-STABILIZATION      169 

that  the  situation  had  got  beyond  their  control  and 
that  cooperation  was  necessary  if  either  group  was  to 
reap  the  benefits  of  the  possible  increase  in  business. 
In  February,  1919,  members  of  the  employers'  associ- 
ations met  with  the  Board  of  Governors  of  the  Inter- 
national Allied  Printing  Trades  Association  to  discuss 
the  situation  and  to  find  a  means,  if  possible,  of  stabiliz- 
ing the  printing  industry. 

Other  meetings  ioilowed  in  Cincinnati  and  Chicago, 
in  which  it  was  decided  to  effect  a  permanent  organiza- 
tion. And  in  April  the  draft  for  an  International  Joint 
Conference  Council  was  agreed  upon,  the  first  national 
industrial  government  in  the  United  States.  Its  pur- 
pose, expressed  in  the  Preamble,  is  as  follows : 

"Only  through  joint  conference  in  the  spirit  of  mutual 
helpfulness  between  employers  and  employees  can  the 
foundation  be  laid  for  stable  and  prosperous  conditions  with- 
in the  Printing  Industry.  To  promote  the  spirit  of  coopera- 
tion and  to  deal  with  the  problems  of  the  industry  in  a  way 
to  insure  the  protection  of  the  interests  of  all  concerned,  the 
establishment  of  the  International  Joint  Conference  Council 
is  considered  essential." 

The  Council  is  a  representative  body  of  twelve  mem- 
bers, four  trade  unionists  and  eight  employers.^    Each 

*  Membership  of   the  International  Joint  Conference   Council. 
Employers'    Associations : 

Closed  Shop  Branch  of  the  United  Typothetae  of  Amer- 
ica   (2) 

Printers'   League   of   America    (2) 

International  Association  of  Employing  Electrotypers  and 
Stereotypers    (2) 

Employing  Bookbinders  of  America  (2)    (not  yet  jointly 
affiliated) 
International  Unions : 

International  Typographical  Union    (i) 

International  Printing    Pressmen's    and    Assistants'    Un- 
ion   (i) 

International  Stereotypers'  and  Electrotypers'   Union   (l) 

International  Brotherhood  of  Bookbinders  (i) 


170  INDUSTRIAL  GOVERNMENT 

union  representative  has  two  votes.  This  division  was 
made  because  the  unions  felt  that  they  could  not  afford 
to  send  more  than  one  member  to  the  meetings,  while 
the  employers,  on  the  other  hand,  needed  a  larger  num- 
ber of  representatives  on  account  of  diverse  local  con- 
ditions. There  are  two  joint  chairmen  who  sit  side 
by  side  at  the  head  of  the  table,  a  trade  union  president 
and  an  employer.  Meetings  are  held  usually  once  in 
two  months  in  different  printing  centers. 

Though  the  chief  function  of  the  Council  is  legis- 
lative, its  law-making  power  is  limited.  All  resolutions 
not  only  have  to  be  passed  unanimously  by  the  Council, 
but  they  must  be  ratified  by  all  of  the  organizations. 
Once  accepted,  however,  they  become  the  law  of  the 
trade  for  the  United  States  and  Canada.  In  this  way 
the  machinery  has  been  set  up  to  develop  a  body  of 
law  for  the  printing  trades  which  will  be  representative 
of  the  will  of  the  electorate,  the  employers  and  em- 
ployees. The  power  of  enforcement  lies  in  the  dis- 
ciplinary control  of  the  different  organizations  over 
their  members.  In  prosperous  times  it  is  the  trade 
union  radical  whom  it  is  hard  to  curb  and  in  periods 
of  falling  prices  and  an  overstocked  labor  market,  it  is 
the  employer  with  open  shop  tendencies,  the  man  who 
wants  "to  run  his  own  business." 

Judicial  authority,  also,  has  been  left  in  the  hands 
of  the  separate  organizations,  but  their  practice  has 
been  standardized  by  an  arbitration  code  which  the 
council  has  drafted  to  be  used  by  all  members.  Unless 
some  such  provision  was  made,  the  Council  realized 
that  it  would  be  required  to  pass  upon  cases  involving 
its  own  recommendations.  If  the  experience  of  the 
Whitley  Councils   in   England  can  be  considered  a 


STANDARDIZATION-STABILIZATION      171 

parallel  example,  the  decision  was  a  wise  one,  for  re- 
cent reports  indicate  that  the  functions  of  those  councils 
have  been  subordinated  to  the  judicial  and  that  they 
have  become  in  many  instances  merely  courts  for  the 
settlement  of  disputes  rather  than  progressive  legis- 
lative bodies. 

In  spite  of  the  governmental  activities  of  the  Coun- 
cil there  has  been  no  real  power  delegated  to  it.  Any 
organization  can  block  any  resolution  either  in  the 
Council  or  by  referendum  vote  so  that  in  no  sense 
has  individual  automony  been  sacrificed.  No  action 
can  be  taken  on  international  union  laws  and  it  has 
little  or  no  power  of  enforcement.  The  constitution 
is  without  an  "Article  Ten."  Age-long  craft  jealousy 
and  independent  spirit  of  the  locals  would  have  made 
a  stronger  association  impossible.  Its  real  force  lies 
rather  in  good-will  and  the  intangible  elements  of  moral 
power  which  have  grown  out  of  the  mutual  trust 
created  by  the  frank  "man  to  man"  relationship  in  the 
Council.  Too  much  credit  cannot  be  given  to  the  first 
small  group  of  pioneers  who  cast  prejudices  aside  and 
united  in  a  common  cause,  the  welfare  of  the  industry. 

Right  of  contract  and  joint  counsel  on  problems  of 
management  are  the  two  principles  on  which  the  Coun- 
cil is  based.  These  have  been  incorporated  into  a 
scheme  or  organization  which  makes  no  change  or 
redistribution  of  the  balance  of  power.  In  this  sense 
it  is  not  a  government  but  rather  a  Council  where  op- 
posing groups  can  meet  to  present  important  questions 
and  to  plan  constructively  for  the  future  of  the  in- 
dustry. It  has  assumed  no  obligations,  but  as  it  vindi- 
cates its  existence  and  inspires  confidence  there  is 
every  expectation  that  its  powers  will  increase.  ^  ^As  site 


172  INDUSTRIAL  GOVERNMENT 

enthusiastic  trade  union  president  put  it,  "It  is  in  fact 
an  evolutionary  instrument  that  provides  the  gradual 
promotion  of  a  relationship  that  will  be  stable  and 
lasting." 

There  are  many  who  fear  an  element  of  danger  in 
this  form  of  organization.  When  labor  and  capital 
get  together,  there  is  a  strong  possibility  that  the  public 
will  be  "held  up."  The  force  which  keeps  labor  and 
capital  apart  is  the  antagonism  between  wages  and 
profits.  When  an  increase  in  wages  cannot  be  passed 
on  to  the  consumer  in  the  form  of  higher  prices,  be- 
cause of  competition,  it  must  come  out  of  profits.  If, 
however,  through  joint  councils,  an  agreement  can  be 
reached  which  will  apply  to  all  employers  and  employ- 
ees, the  public  pays  the  bill.  Such  a  situation  has,  in 
fact,  arisen  in  the  photo-engraving  industry  which  is 
almost  completely  organized.  But  there  is  little  danger 
of  it  in  the  book  and  job  printing  industry  since  over 
half  the  employers  run  open  shops.  The  United 
Typothetae  of  America,  which  is  by  far  the  largest 
employers'  association  in  the  printing  trades,  is  com- 
posed of  both  closed  shop  and  open  shop  employers. 
They  hold  joint  meetings  on  all  questions  involving 
"educational  policies,"  such  as  costfinding  systems, 
credit,  and  apprenticeship.  For  determining  matters 
of  labor  policy  the  members  are  divided  into  two  di- 
visions, the  Closed  Shop  Division  and  the  Open  Shop 
Division,  which  function  as  two  separate  organizations. 
When  labor  is  scarce  the  influence  of  the  open  shops 
is  not  so  strong,  since  they  have  to  provide  even  more 
attractive  wages  and  conditions  to  maintain  their 
working  force.  At  such  times  labor  is  dictator.  When 
the  supply  of  labor  is  normal,  however,  the  open  shops 


STANDARDIZATION-STABILIZATION      1 73 

are  a  powerful  restraining  factor,  capable  of  under- 
bidding in  the  highly  competitive  market.  Thus  they 
act  as  a  balance  wheel.  The  power  of  the  courts  to 
dissolve  price-fixing  combinations  and  to  curb  activi- 
ties in  restraint  of  trade  checks  any  obvious  and  formal 
attempts  to  conspire  against  the  public.^  Another 
means  of  offsetting  the  dangerous  effects  of  such  trade 
alliances  is  to  have  the  public  represented  on  the  coun- 
cils. In  the  Whitley  Councils  the  government  has 
representatives.  In  New  York  the  publishers  of  books 
and  periodicals,  though  not  as  emissaries  of  the  public 
yet  as  customers  of  the  printers,  have  been  asked  to 
send  a  representative  to  the  New  York  Printers 
Council. 

But  there  is  too  much  of  good  to  be  gained  from  this 
form  of  government  to  repudiate  it  on  account  of  the 
possibility  of  future  monopolistic  control.  Inefficiency, 
loss  of  time  through  strikes  and  lockouts,  industrial 
unrest,  duplication  of  effort,  business  failures  are  just 
as  disastrous  to  public  welfare  and  react  on  prosperity. 
If  the  danger  becomes  imminent,  some  different  form 
of  control  must  be  created  which  should,  however,  pre- 
clude the  possibility  of  return  to  the  former  "big  stick" 
method  of  industrial  relations.  Meanwhile  the  Inter- 
national Joint  Conference  Council  has  been  justifying 
its  existence. 

THE   WORK    OF    THE    COUNCIL 

From  the  outset,  the  Council  was  no  paper  organi- 
zation. It  immediately  set  to  work  to  find  some 
practical  solution  of  the  problems  of   reconstruction 

*See  below,  pp.  180  and  i8i. 


174  INDUSTRIAL  GOVERNMENT 

facing  the  industry.  It  was  a  time  when  there  were 
no  standards.  Each  group  had  adopted  a  poHcy  of 
expediency  and  made  what  gains  it  could  for  its  own 
ends.  Consequently,  local  as  well  as  national  industrial 
relations  were  in  a  chaotic  state.  What  was  needed 
was  a  crystallization  of  a  labor  policy  into  fundamental 
principles,  capable  of  immediate  and  general  applica- 
tion which  would  provide  common  methods  and  com- 
mon standards  in  wage  negotiations  and  in  the 
settlement  of  disputes.  The  Council  adopted  for  its 
slogan  "stabilization  and  standardization,"  and  as  the 
first  step  in  its  program,  formulated  Five  Cardinal 
Points  of  a  Labor  Policy  to  be  used  in  all  wage  nego- 
tiations : 

1.  That  the  industry  frankly  recognize  the  cost  of  living, 
as  compared  to  1914,  as  the  basic  principle  in  wage  ad- 
justment. 

2.  That  the  industry  pay  at  least  a  reasonable  living 
wage;  scales  below  this  to  be  adjusted  in  frank  recognition 
of  the  basic  principle  involved. 

3.  That,  when  not  in  conflict  with  the  existing  laws  of  the 
constituent  body,  local  contracts  be  for  a  period  of  not 
less  than  three  years,  and  include  a  clause  providing  for 
annual  readjustments  of  wages  based  upon  the  cost  of  living, 
as  determined  by  authorities  jointly  agreed  upon,  and  upon 
the  economic  conditions  of  the  industry  at  the  time  of  the 
readjustments. 

4.  That  a  uniform  standard  system  of  cost-keeping  is  con- 
sidered fundamental  to  insure  stability,  permanence,  and 
prosperity  to  the  industry,  and  to  provide  a  basis  for  secur- 
ing a  greater  degree  of  uniformity  in  conditions  throughout 
the  country;  a  clause  to  be  included  in  local  agreements 
providing  that  such  a  standard  system  as  is  recognized  by 
the  organizations  represented  in  the  International  Joint  Con- 
ference Council  be  required. 


STANDARDIZATION-STABILIZATION      175! 

5.  That  controversies  over  wages,  hours,  and  working 
conditions  between  employers  and  employees  can  and  should 
be  settled  without  resorting  to  lockouts  or  strikes,  through 
voluntary  agreements  to  refer  disputes,  where  unable  to 
settle  through  conciliation,  to  joint  boards  of  arbitration 
composed  of  equal  representation  of  employers  and  em- 
ployees, provision  being  made  for  an  impartial  arbitrator 
if  necessary. 

The  failure  of  the  employers  to  increase  wages  to 
meet  the  rising  cost  of  living  had  been  an  aggravating 
factor  back  of  the  "direct  action"  movement.  At  the 
outbreak  of  the  war  many  local  unions  were  under  long- 
term  wage  contracts  which  contained  no  clauses  provid- 
ing for  readjustment.  When  prices  rose,  the  workers 
asked  for  higher  money  wages  and  were  invariably 
refused  on  the  ground  of  the  sacredness  of  contracts. 
In  some  cases  they  resorted  to  "direct  action"  and  won 
out.  To  mitigate  this  situation  the  Council  drafted  the 
first  three  points,  recommending  a  reasonable  living 
wage  and  its  maintenance  by  means  of  an  automatic 
readjustment  clause  to  operate  on  the  basis  of  the 
changes  in  the  cost  of  living.  By  this  means  flexibility 
has  been  secured  for  the  long-term  contract  which  is 
desirable  for  stability  in  the  industry. 

The  first  application  of  these  principles  was  made 
in  Chicago  in  August,  19 19.  At  the  reopening  of  the 
wage  negotiations  both  sides  produced  statistics.  Ac- 
cording to  the  union's  figures,  which  were  based  on 
wholesale  prices  of  a  wide  variety  of  products,  the  cost 
of  Hving  had  increased  102  per  cent  since  19 14.  The 
employers'  figures,  obtained  from  the  U.  S.  Bureau 
of  Labor  Statistics,  showed  that  retail  prices  of  all 
articles  in  the  family  budget  had  risen  only  74.47  per 


176  INDUSTRIAL  GOVERNMENT 

cent.  The  employers'  figures  were  finally  accepted  as 
pertinent  to  wages  and  the  wages  were  increased  74.47 
per  cent  above  the  19 14  scale.  In  the  new  supplemental 
contract  provision  was  made  for  an  automatic  read- 
justment of  the  scales  every  six  months  according  to 
the  cost  of  living  figures  of  the  Bureau  of  Labor  Sta- 
tistics. 

Since  then  the  principle  has  had  wide  application  in 
nearly  all  of  the  big  printing  centers.  In  instances 
where  the  19 14  scale  was  obviously  below  a  reasonable 
wage  the  base  was  revised.  One  employer  reported  as 
follows : 

*T  got  the  cylinder  feeders  to  appoint  a  statistician 
to  check  me  up  on  cost  of  living  figures  and  after  a 
series  of  conferences  between  employers  and  employ- 
ees, in  which  not  a  heated  word  was  spoken,  by  the  use 
of  facts,  reason,  and  a  square  deal,  we  arrived  at  the 
first  peaceful  settlement  of  a  wage  controversy  in  this 
local  printing  industry  since  19 17.  I  am  sure  if  the 
employers  continue  in  the  policy  they  are  now  adopt- 
ing, they  can  eliminate  direct  action." 

The  aim  of  such  a  clause  is  to  substitute  the  use  of 
facts  for  the  gambling  method  of  determining  wages 
in  which  both  sides  refuse  to  display  their  cards.  In 
wage  negotiations  it  has  been  customary  for  the  unions 
to  ask  for  six  dollars  when  they  expect  to  get  three  dol- 
lars, and  for  the  employers  to  use  similar  tactics.  But 
there  is  still  another  factor.  "Family  budgets  and  fam- 
ily bread  bills"  are  only  one  element  in  the  wage  which 
in  the  ultimate  analysis  should  rest  upon  the  prosperity 
of  the  business.  There  is  no  labor  group  today  which 
has  not  before  it  the  vision  of  a  higher  standard  of 


STANDARDIZATION-STABILIZATION      i  jj 

comfort.  Whether  they  can  attain  it,  is  dependent 
upon  two  factors :  the  earning  capacity  of  the  business 
and  their  bargaining  power.  Again  and  again  labor 
has  been  told  that  the  industry  could  not  stand  a  wage 
increase  and  yet  such  demands  have  been  met  not  once 
but  many  times,  until  labor  has  lost  sight  of  the  "eco- 
nomic conditions  of  the  industry"  as  a  limiting  factor. 
According  to  the  Third  Cardinal  Point,  however,  it 
must  be  included. 

This  is  a  more  difficult  theory  to  apply  concretely, 
for  it  is  composed  of  many  unknowns.  What  is  the 
"economic  condition  of  the  industry"  and  what  items 
does  it  include?  To  reduce  this  element  to  a  factual 
basis  the  Council  recommended  that  economic  surveys 
be  undertaken  in  the  various  printing  centers.  The 
first  was  inaugurated  in  Chicago  under  the  direction 
of  Dr.  Horace  Secrist  of  Northwestern  University  and 
was  based  on  the  following  analysis : 

"i.  Production  Facts — Factory  Analysis. 

"Under  this  head  such  topics  as  production  methods,  spe- 
cialization, sources  and  prices  otf  materials,  purchasing 
methods,  handling  of  stocks  and  inventories,  character  and 
amount  of  output,  etc.,  should  be  investigated. 

"2.  Labor  Facts — Industrial  Survey. 

"Under  this  head,  employees  should  be  fully  classified  by 
types,  duration  of  service,  and  wage  rates;  and  hours  of 
labor,  turnover,  sources  of  labor  supply,  welfare  and  work- 
ing conditions  and  industrial  discontent,  etc.,  should  be 
measured  where  possible.  Moreover  a  study  should  be  made 
of  apprenticeship  relations  and  the  bearing  of  these  upon 
the  labor  market.  It  is  not  intended  here  to  include  a  com- 
plete list  of  facts  to  which  attention  should  be  given,  but 
only  those  which  seem  to  be  of  primary  significance. 


178  INDUSTRIAL  GOVERNMENT 

"3.  Financial  Analysis. 

"Under  this  heading,  inquiry  should  be  addressed  to  such 
matters  as  the  following:  types  and  amount  of  investment, 
earnings,  resources,  equipment,  accounting  methods  and 
control,  cost  analysis,  etc. 

"4.  Trade  Facts  and  Analysis. 

"In  relation  to  this  topic,  the  significant  facts  having  to 
do  with  local  and  regional  competition  and  cooperation, 
as  well  as  to  the  concentration  of  the  industry  in  Chicago 
should  be  considered." 

Another  interesting  case  occurred  during  wage  arbi- 
tration proceedings  in  New  York  in  the  winter  of 
1920.^  In  arguing  the  case  of  the  union,  President 
A.  G.  Hayes  of  the  New  York  Paper  Handlers'  Union, 
No.  I,  maintained  that  the  union  was  greatly  handi- 
capped in  the  presentation  of  its  case  and  that  the 
arbitrators  could  not  render  an  intelligent  decision 
because  of  lack  of  complete  information  as  to  capitali- 
zation, assets,  liabilities,  earnings,  dividend  payments, 
and  surplus  of  the  printing  firms,  covering  the  past  five 
years.  Both  the  arbitrator  and  the  employers  agreed 
that  the  "economic  condition  of  the  industry"  could  not 
be  determined  without  the  facts.  Though  the  em- 
ployers refused  to  make  their  books  available  to  the 
union,  they  assented  to  a  joint  survey  by  expert  ac- 
countants on  a  broad,  comprehensive  basis,  if  a  feasible 
plan  could  be  determined  upon. 

But  there  is  one  point  upon  which  the  Council  did 
not  touch.  When  the  economic  condition  of  the  indus- 
try has  been  ascertained,  upon  what  basis  is  the  division 
between  wages  and  profits  to  be  made  ?  This  after  all 
is  the  crux  of  the  problem  and  upon  it  the  Council  is 

'Under  consideration,  January,   1920. 


STANDARDIZATION-STABILIZATION      179 

silent.  Since  the  unit  of  measure  has  not  been  dis- 
covered, the  share  of  each  factor  will  still  depend  upon 
bargaining  power,  swinging  between  the  limits  of  the 
bare  cost  of  living  for  the  workers  and  the  minimum  of 
profits  necessary  to  keep  the  business  alive.  The  real 
service  of  such  an  investigation  is  the  publication  of 
the  facts  upon  which  to  justify  demands.  In  the  past 
bargaining  power  has  been  blind,  and  ignorance  of 
conditions  has  been  a  cause  of  hostile  feeling  and 
suspicion.  With  the  facts  thus  ascertained  and 
weighed,  collective  bargaining  ought  to  enter  into  a 
new  era.  Everything  will  depend  upon  the  method 
used  and  the  willingness  of  the  employers  to  open  their 
books,  for  there  are  many  trade  facts  which  competi- 
tors necessarily  wish  to  keep  from  each  other. 

Statistics  require  accurate  and  uniform  cost-keeping 
and  this  is  the  Fourth  Cardinal  Point.  Cost-keeping 
will  serve  as  a  business  barometer.  The  progressive 
printing  employers  have  favored  it  for  many  years 
because  it  eliminates  competition  from  cut-prices  due 
to  ignorance,  the  bugbear  of  the  printing  industry.  It 
is  only  recently  that  it  has  been  considered  an  element 
in  the  labor  policy.  With  the  adoption  of  arbitration, 
and  the  principles  which  have  just  been  considered,  the 
settlement  of  disputes  depends  upon  facts.  Usually 
there  is  no  cooperation  in  the  collection  and  assembling 
of  statistics  and  often  the  labor  group  does  not  under- 
stand the  employers'  figures.  The  adoption  of  a  uni- 
form standard  cost-keeping  system  through  joint  action 
of  unions  and  employers  would  eliminate  the  misunder- 
standing arising  from  the  use  of  facts  in  wage  negotia- 
tions and  in  arbitration  proceedings.  It  would  also 
serve  as  an  agency  for  standardization. 


i8o  INDUSTRIAL  GOVERNMENT 

In  the  customary  clause  adopting  the  principle,  the 
unions  agree  not  to  work  for  employers  who  do  not 
operate  their  business  under  the  Standard  Cost-finding 
Clause  and  the  employers  agree  to  employ  only  union 
labor.  In  this  sort  of  an  agreement  there  is  an  element 
of  danger  as  illustrated  in  the  photo-engraving  industry, 
where  the  unions  have  carried  the  development  further 
and  have  set  even  the  minimum  selling  base  for  photo- 
engraving. Union  members  will  not  work  for  em- 
ployers who  charge  lower  prices  on  the  theory  that  they 
would  react  unfavorably  on  the  conditions  surrounding 
the  industry.  The  publishers  of  trade  papers  and  news- 
papers brought  suit  against  this  combination  in  the 
New  York  Court  under  the  Donnelley  Act  for  con- 
spiring arbitrarily  and  unlawfully  to  raise  and  fix  prices 
of  engravings.  They  lost  their  case  on  the  ground  that 
photo-engravings  are  not  commodities  within  the  mean- 
ing of  the  laws  in  restraint  of  trade  but  a  process  or 
act,  the  result  of  which  is  not  merchantable.  They 
are  considered  in  the  light  of  a  contract  between  buyers 
and  sellers  of  labor  or  services  rather  than  salable  com- 
modities. As  a  result  of  this  decision  of  Judge 
Mulqueen's,^  labor  not  only  can  fix  the  prices  of  its 
services  with  employers,  but  also  the  price  the  customer 
must  pay  for  these  services. 

The  photo-engravers  are  not  members  of  the  Inter- 
national Joint  Conference  Council.  The  printers,  who 
are  members,  are  not  in  a  favorable  situation  for  two 
reasons :  they  produce  commodities  instead  of  services 
and  standardization  of  prices  is  difficult  since  the  unit 
of  measurement  is  variable  and  not  the  square  inch  of 

*Not  reported.    See  American  Photo-Engravers,  March,  1915, 
p.  183. 


STANDARDIZATION-STABILIZATION      i8i 

photo-engraving.  Realizing  the  possibility  of  an  ad- 
verse court  decision,  the  Council  has  been  very  cautious 
in  adopting  even  a  standard  cost-finding  clause  and  has 
sought  legal  advice  from  the  consulting  lawyers  of  the 
dififerent  organizations  represented.  Their  opinion  has 
been  practically  unanimous  that  a  simple  cost-finding 
clause,  such  as  the  one  mentioned  above,  is  legal,  and 
that,  since  the  courts  have  upheld  the  right  of  any  man 
to  refuse  to  work  for  an  employer  unless  he  employs 
union  men,  the  same  rule  would  apply  in  regard  to 
refusal  to  work  for  an  employer  unless  he  adopts  a 
cost-finding  system.  One  lawyer  included  a  note  of 
warning:  "The  serious  situation,  however,  is  whether 
it  is  a  conspiracy  to  fix  prices.  That  would  depend  a 
good  deal  on  how  it  (the  clause)  operated.  So  long 
as  each  individual  employer  maintains  his  own  cost-' 
finding  system  and  ascertains  the  actual  bona  fide  cost 
of  his  individual  plant,  there  cannot  be  any  charge  of 
price  fixing.  However,  if  a  group  of  employers  under 
such  a  contract  get  together  and  average  the  cost  by 
which  they  make  a  fictitious  cost  instead  of  an  actual 
bona  fide  cost,  then  I  am  inclined  to  think  it  would  be 
a  conspiracy  to  fix  prices."  Only  last  year  the  United 
Typothetae  of  America  was  investigated  by  the  Federal 
Trade  Commission  because  of  their  campaign  to  in- 
stall a  standard  cost-finding  system.  They  were  exon- 
erated, however,  because  there  was  no  evidence  of 
restraint  of  trade.  Rightly  interpreted,  therefore,  the 
application  of  such  a  clause  will  make  for  business 
stability  and  an  enlightened  labor  policy.  And,  as 
previously  stated,  as  long  as  there  is  an  active  and 
strong  open  shop  organization  in  the  book  and  job 
printing  industry,  as  there  is  not  in  the  photo-engraving 


i82  INDUSTRIAL  GOVERNMENT 

industry,  there  will  be  no  actual  danger  of  a  price 
conspiracy. 

Since  the  adoption  of  this  principle  by  the  Council, 
it  has  met  with  unexpected  opposition  both  from  the 
radical  labor  group  and  a  conservative  element  among 
the  closed  shop  employers.  The  left  wing  of  labor  is 
against  its  application  on  the  ground  that  it  is  not 
the  proper  function  of  labor  to  run  the  employer's  busi- 
ness, but  to  exact  as  high  a  recompense  as  possible  and 
to  take  advantage  of  conditions  as  they  arise.  In  other 
words,  theirs  is  a  militant  philosophy  which  contains 
no  element  of  cooperation.  Some  of  the  employers,  on 
the  other  hand,  are  afraid  of  it  because  they  fear  that 
it  will  open  the  way  for  the  unions  to  demand  an  in- 
vestigation of  the  employers'  books  and  to  secure  a 
hold  on  the  industry  similar  to  that  of  the  union  of 
photo-engravers.  As  one  employer  forcefully  said, 
*T  for  one  will  never  consent  to  unions  investigating 
my  company's  books,  never.  It  is  none  of  their  busi- 
ness." Cost-finding  systems  are  fine  apparently  when 
they  are  in  the  control  of  employers,  but  they  represent 
advantages  which  cannot  be  shared. 

There  is  little  that  need  be  said  concerning  the  last 
Cardinal  Point  which  deals  with  arbitration,  a  corollary 
of  all  real  collective  bargaining.  To  put  it  into  im- 
mediate effect,  the  Council  drew  up  a  standard  national 
arbitration  agreement  to  be  used  by  the  separate  inter- 
national unions  and  employers'  associations.  As  it  is 
to  some  extent  an  experiment,  a  duration  clause  of  only 
three  years  was  included.  It  contains  an  international 
agreement  between  the  two  national  organizations  af- 
fected with  a  detailed  code  of  procedure  and  a  standard 
form  of  individual  arbitration  contract  to  be  used  by 


STANDARDIZATION-STABILIZATION      183 

the  locals  with  an  appeal  to  the  international  board. 
It  can  be  considered  the  "last  word"  in  arbitration 
agreements.  With  both  the  employers  and  the  unions 
urging  its  adoption  by  all  their  members,  it  will  do 
much  to  standardize  the  method  of  dealing  with  indus- 
trial disputes  and  will  give  the  strongest  possible  se- 
curity of  industrial  peace.  If  the  leaders  of  both  sides 
can  control  their  local  constituencies,  such  an  agree- 
ment practically  guarantees  the  elimination  of  all 
strikes  and  lockouts,  except  in  cases  of  extremity,  for 
as  one  union  president  said,  "these  national  boards  are 
boards  of  exhaustion." 


THE  44-HOUR    WEEK    AND      DIRr.CT   ACTION 

Another  immediate  problem  facing  the  Council  was 
the  question  of  the  forty-four  hour  week.  The  issue 
was  not  a  new  one,  but  the  position  of  added  strength 
of  the  unions,  following  the  war,  forced  the  demand 
in  the  more  radical  centers.  Indeed,  it  was  partly  the 
realization  of  this  situation  which  made  many  employ- 
ers eager  to  organize  the  Council,  for  unless  the  forty- 
four-hour  week  were  a  universal  proposition,  it  would 
be  difficult  for  the  forty-four-hour  shops  to  compete 
with  the  forty-eight-hour  shops.  It  was  a  critical  time 
for  the  Council.  The  New  York  unions  included  it  in 
their  demands  for  October  ist;  the  photo-engravers 
secured  it  for  January  i,  1920,  and  withdrew  from  the 
Council  after  the  second  meeting  because  of  its  con- 
servatism on  this  issue ;  other  demands  were  in  the 
offing.  The  union  presidents  were  animated  by  two 
desires :  to  secure  its  universal  adoption  at  the  earliest 
possible  moment  juid  to  avoid  another  such  conflict  as 


i84  INDUSTRIAL  GOVERNMENT 

the  fight  for  the  eight-hour  day  in  1906  which  cost 
them  $11,000,000.  The  employers,  on  the  other  hand, 
felt  that  the  industry  could  not  stand  a  sudden  transi- 
tion. After  considering  all  factors,  May  i,  192 1,  was 
set  as  the  date  for  its  inauguration,  and  the  action  was 
duly  ratified  by  all  organizations.  The  four  interna- 
tional unions  have  since  passed  a  resolution  stating 
that,  "a  moral  obligation  rests  upon  their  members  to 
stimulate  production  so  that  the  introduction  of  the 
forty-four-hour  week  shall  carry  with  it  as  small  a  de- 
crease of  output  as  possible,"  with  hope  of  forestalling 
wage  decreases. 

The  New  York  strike-vacation-lockout  in  the  fall 
was  the  "direct-actionists'  "  answer  to  the  Council.  As 
it  forced  the  Council  to  take  a  stand  on  several  other 
issues  as  well,  it  is  worth  while  to  review  the  case. 

Since  the  eight-hour  strike  of  1906,  there  had  been 
no  serious  industrial  disturbances  in  New  York.  Both 
the  Closed  Shop  employers,  who  do  about  seventy-five 
per  cent  of  the  business  in  New  York,  and  the  unions 
were  well  organized  and  accustomed  to  deal  with  each 
other  through  arbitration  agreements.  "Big  6,"  the 
local  union  of  the  International  Typographical  Union, 
was  working  under  a  contract  dated  from  January  i, 
19 1 6,  to  September  30,  19 19,  and  No.  51  of  the  Inter- 
national Printing  Pressmen's  and  Assistants'  Union 
under  a  contract  dated  from  December  i,  191 5,  to 
September  30,  1919.  No.  23,  the  Press  Feeders'  Local, 
was  also  under  a  long-term  contract.  By  19 17  the  cost 
of  living  had  increased  thirty  per  cent  over  191 5  and 
the  feeders,  whose  wages  have  always  been  notoriously 
low,  felt  the  pinch  first.  When  they  asked  for  a  re- 
vision of  the  wage  scales  in  April,  191 7,  they  were 


STANDARDIZATION-STABILIZATION      185 

refused  on  the  grounds  that  such  a  change  would  affect 
the  stabiHty  of  contracts  which  meant  business  confi- 
dence. The  unions,  including  No.  51,  had  no  thought 
of  breaking  contracts  but  wanted  to  arbitrate  the  ques- 
tion of  wage  increases.  Demands  were  made  again  in 
October.  At  length  the  employers  offered  a  small 
increase,  but  their  offer  was  refused.  It  was  too  late. 
No.  2^  quit  work  to  wait  for  a  four-dollar  raise.  Since 
it  was  during  the  rush  season,  the  employers  were 
forced  to  capitulate  and  to  grant  increases  to  the  other 
unions  as  well.  Thus,  after  six  months  of  talk,  direct 
action  forced  the  issue  in  three  days  and  the  unions 
discovered  a  dangerous  weapon. 

Cost  of  living  continued  to  mount  and  in  19 18  new 
requests  were  made.  This  time  the  War  Labor  Board 
was  summoned  to  the  rescue  by  the  employers  who 
feared  another  strike.  This  action  angered  the  unions, 
who  considered  it  a  violation  of  the  arbitration  agree- 
ment. Adjustments  were  made  finally  and  an  agree- 
ment signed  to  reopen  the  scales  again  in  May,  19 19. 
By  that  time  the  New  York  unions  had  learned  the 
value  of  cooperation  among  themselves  and  had  united 
their  forces.    Three  issues  were  involved: 

1.  Wage  increases  to  meet  the  cost  of  living. 

2.  The  adoption  of  the  forty-four  hour  week  on  October 
I,  1919. 

3.  The  adoption  of  the  photo-engravers'  plan  of  fixing 
prices. 

As  a  result  of  negotiations,  wage  increases  were  post- 
poned, the  employers  agreed  to  work  for  the  national 
acceptance  of  the  forty- four-hour  week  in  the  Council 
and  to  abide  by  its  decision,  and  to  accept  the  third 


i86  INDUSTRIAL  GOVERNMENT 

proposition  if  legal.  Meanwhile  the  Council  passed 
the  forty-four-hour  week  resolution  to  take  effect  in 
May,  1 92 1. 

When  negotiations  began  in  August  the  temper  of 
the  New  York  unions  was  militant.  They  had  taken 
for  their  slogan  "44-50  or  fight."  All  other  consider- 
ations, including  arbitration  which  had  been  adopted 
as  the  Fifth  Cardinal  Point  by  the  Council,  were  flatly 
refused.  The  situation  became  further  complicated  by 
the  fact  that  both  No.  23  and  No.  51  were  suspended 
from  the  International  Printing  Pressmen's  and  As- 
sistants' Union  for  non-payment  of  dues.  They  be- 
longed to  a  group  of  locals  who  were  trying  to  im- 
peach their  president,  George  L.  Berry. 

It  was,  it  will  be  remembered,  the  time  of  the  illegal 
strike  of  the  Railroad  Shop  Men.  Secession  and  radi- 
calism were  in  the  air.  The  balance  of  power,  for  the 
time  being,  had  been  destroyed  in  favor  of  the  workers. 
The  international  union  presidents  realized  that  the 
issue  was  a  national  one  and  that  united  effort  was 
needed  to  fight  the  "orgy  of  radicalism."  Their  first 
step  was  to  join  forces  with  the  employers.  The  In- 
ternational Printing  Pressmen's  and  Assistants'  Union 
set  up  new  local  unions  in  New  York  for  old  line  trade 
unionists.  The  photo-engravers  and  the  electrotypers, 
who  had  gotten  what  they  wanted  through  their  na- 
tional unions,  shut  off  plates  and  engravings  from  firms 
employing  recalcitrant  members.  The  American  Fed- 
eration of  Labor  threatened  to  revoke  the  charter  of 
the  Central  Federated  Union  of  New  York  if  that 
body  continued  friendly  relations  with  the  outlaws. 
But  the  deciding  factor  was  the  mandate  issued  by  the 
President  of  the  International  Typographical  Union 


STANDARDIZATION-STABILIZATION      187 

ordering  the  vacationists  back  to  work  and  to  arbitrate. 
Expulsion  from  the  International  Typographical 
Union  would  have  serious  financial  consequences.  Con- 
sequently, not  only  did  the  compositors  return  to  work 
but  the  pressmen  and  feeders  affiliated  themselves  with 
the  new  locals.  Combined  action  had  succeeded  in 
holding  the  weaker  employers  from  yielding  to  the 
"direct  actionists,"  and  in  breaking  the  power  of  the 
radical  leaders. 

The  strike  was  over  and  "direct  action"  was  defeated. 
The  influence  of  the  Council  had  been  intangible,  but 
it  was,  nevertheless,  very  real.  It  had  defined  the  issues 
on  which  the  employers  and  international  unions  had 
taken  their  stand, — cost  of  living  in  wage  adjustments, 
arbitration,  the  national  inauguration  of  the  forty- 
four-hour  week,  and  the  underwriting  of  local  agree- 
ments by  officers  of  the  international  unions.  But  most 
of  all  it  was  important  because  it  provided  the  machin- 
ery for  open  discussion  of  the  strike,  its  causes,  the 
principles  involved,  and  the  tactics  to  be  employed,  and 
made  possible  combined  action  without  which  neither 
group  could  have  won  single  handed.  It  is  significant, 
however,  that  the  president  of  the  International  Typo- 
graphical Union  was  defeated  for  reelection  in  1920, 
and  a  New  York  "direct  actionist"  was  placed  at  the 
head  of  the  national  union.  Also,  in  their  convention 
in  September,  1920,  the  Open  Shop  Division  of  the 
United  Typothetae  of  America  passed  a  resolution 
opposing  the  introduction  of  the  forty- four-hour  week. 

APPRENTICESHIP 

Among  the  more  fundamentally  constructive  plans, 
which  the  Council  has  initiated,  is  their  treatment  of 


i88  INDUSTRIAL  GOVERNMENT 

the  apprentice  problem,  a  cause  of  much  friction  in  the 
past.  Since  the  life  of  the  trade  is  dependent  on  skilled 
workers,  the  necessity  of  a  long  period  of  training  has 
placed  demand  and  supply  on  an  artificial  basis.  On 
one  side  the  employers  have  been  desirous  of  increas- 
ing the  numbers  to  keep  down  wages,  whereas  the 
unions  have  fought  for  a  limitation  of  supply  in  order 
to  maintain  and  to  raise  industrial  standards.  As  a 
result  of  the  lack  of  cooperation  there  has  been  dupli- 
cation of  effort  and  a  really  chaotic  condition  has  been 
created  in  regard  to  numbers  and  training.  The  twenty- 
five  per  cent  increase  in  business  since  19 14  made  the 
situation  acute  and  the  Council  immediately  tackled  the 
problem,  on  the  ground  that  it  was  a  question  of  joint 
responsibility. 

As  the  first  step,  the  following  questionnaire  was 
sent  out  by  all  the  unions  to  their  locals  and  by  all  the 
employers'  organizations  to  their  locals : 

"i.  How  many  apprentices  in  proportion  to  the  number  of 
Journeymen  in  the  book  and  job  offices  are  permitted  imder 
your  local   contract? 

"2.  How  many  apprentices  are  there  actually  employed 
in  the  book  and  job  offices  in  your  city? 

"3.  What  is  the  total  number  of  apprentice  vacancies  in 
book  and  job  offices  in  your  city  which  could  be  filled? 

"4.  What  wages  are  paid  during  apprenticeship?" 

Startling  conditions  were  disclosed :  apprenticeship  va- 
cancies varying  from  ten  to  fifty- four  per  cent  at  a 
time  when  employers  were  asking  for  a  favorable 
change  in  ratios;  differences  in  ratios  varying  from 
one  apprentice  to  four  journeymen,  to  one  apprentice  to 
ten  journeymen ;  instances  where  wages  were  consider- 


STANDARDIZATION-STABILIZATION      189 

ably  lower  than  those  of  untrained  messenger  boys. 
When  the  returns  are  all  in  the  Council  will  analyze 
and  publish  the  facts  in  order  to  present  the  situation 
to  the  industry  as  a  whole,  and  to  stimulate  local  com- 
mittees to  act  on  the  basis  of  their  recommendations. 
These  include  a  definite  plan  for  the  organization  of 
local  joint  apprenticeship  committees,  a  scale  based  on 
a  specified  ratio  of  the  journeymen's  scale,  a  definition 
of  the  proper  work  for  an  apprentice  and  provision  for 
local  contracts  in  regard  to  registration  and  training. 
If  the  Council  realizes  its  ambition,  there  is  every 
possibility  that  this  factor  in  the  industry  will  be  both 
standardized  and  stabilized. 

STANDARD    CONTRACTS 

As  a  further  means  of  standardization,  the  Council 
has  drafted  several  standard  clauses  to  be  included  in 
local  contracts  on  cost  of  living,  arbitration  and  the 
organization  of  joint  apprenticeship  committees  and 
has  under  consideration  a  cost-finding  clause.  Now, 
contracts  are  all  different  and  often  incomplete  and 
crude.  They  have  grown  up  like  local  common  law. 
Custom,  rather  than  well  defined  principles,  has  been 
the  guide  in  drafting.  The  dissimilarity  which  results 
causes  great  unevenness  in  local  conditions  "and  makes 
a  comparison  of  contracts  impossible  without  com- 
plete rearrangement.  Standard  clauses  defining  the 
major  issues  will  partly  remedy  this  situation.  But 
what  is  needed  is  a  recommended  standard  form  of 
contract  drafted  on  scientific  and  legal  lines,  adaptable 
to  the  different  crafts  and  diverse  local  conditions.  For 
instance,  one  model  which  has  been  suggested  is  di- 
vided into  four  parts :  I.  Identification,  Duration,  Ar- 


I90  INDUSTRIAL  GOVERNMENT 

bitration.  II.  Wages.  III.  Working  Conditions, 
IV.  Execution,  Ratification,  Underwriting,  with  ap- 
propriate headings  under  each  section  and  suggested 
standard  clauses.  If  such  a  form  were  in  universal 
use,  comparison  would  be  easy  and  much  of  the  burden 
which  rests  on  scale  committees  would  be  lightened. 
There  would  be  less  opportunity  to  confuse  issues. 
This  is  one  of  the  problems  scheduled  for  the  future 
deliberation  of  the  Council. 

Another  and  perhaps  the  most  valuable  function  of 
the  Council  is  intangible  in  its  nature.  The  spirit  of 
mutual  trust  and  confidence  which  has  been  engendered 
between  the  members  who  "lay  all  their  cards  on  the 
table"  has  made  possible  the  consideration  of  many 
delicate  problems.  Difficult  local  situations  are  openly 
discussed  and  analyzed,  contemplated  changes  in  pol- 
icy, such  as  the  question  of  abolition  of  piece  rates  in 
the  binderies  now  under  discussion  by  the  International 
Brotherhood  of  Bookbinders,  and  dif^culties  arising 
out  of  the  application  of  union  laws  and  regulations. 
Though  it  is  not  within  the  province  of  the  Council 
to  act  in  many  of  these  cases  or  even  to  recommend  as 
a  Council,  the  new  light  which  is  thrown  on  many 
questions  by  getting  the  point  of  view  of  the  other  side 
in  such  a  meeting  is  of  considerable  influence.  One 
ardent  Council  member  has  gone  even  so  far  as  to 
express  his  belief  that  the  Council  "can  come  pretty 
near  settling  all  the  problems  that  concern  the  printing 
industry." 

DISTRICT   COUNCILS 

Though  no  agreement  has  been  reached  on  any  defi- 
nite plan,  the  Council  has   under  consideration  the 


STANDARDIZATION-STABILIZATION     191 

establishment  of  district  joint  conference  councils. 
Many  questions,  such  as  wages  and  certain  working 
conditions  are  local  in  their  nature  and  lack  of  uni- 
formity afifects  district  rather  than  national  competition. 
The  need  for  some  form  of  organization  has  long  been 
recognized  and  in  several  districts  temporary  local 
councils  have  been  formed  to  meet  critical  situations. 
Other  districts  have  asked  the  Council  for  a  constitu- 
tion. But  the  complexity  of  the  problem  has  delayed 
the  adoption  of  any  policy.  The  size  of  the  districts, 
classification  of  cities,  representation,  jurisdiction  and 
the  relation  to  the  International  Joint  Conference  Coun- 
cil are  difficult  questions  requiring  careful  treatment. 
The  inauguration  of  district  councils,  however,  will  do 
much  to  insure  the  existence  and  influence  of  the  na- 
tional Council  which  at  the  present  time  is  government 
superimposed  from  above.  Local  organization  is,  after 
all,  the  germ  or  cell  of  democratic  government,  and 
unless  it  finds  an  outlet  for  expression  is  unlikely  to 
take  a  friendly  interest  in  the  national  Council  or  to 
submit  to  its  authority.  The  Whitley  Councils  in 
England  and  the  national  councils  in  Belgium  have 
recognized  this  principle  and  built  upon  it.  If  some 
plan  of  decentralization  can  be  worked  out  for  the  book 
and  job  printing  industry,  there  will  be  greater  assur- 
ance of  the  permanence  of  the  national  industrial  gov- 
ernment. 

The  Council  may  look  back  with  pardonable  pride 
to  the  record  of  its  first  year  of  probation  in  which  it 
took  no  small  part  in  returning  the  industry  to  a  peace 
basis.  The  legislative  and  judicial  machinery  which 
it  set  up,  worked.  The  principles  laid  down  in  the 
Five  Cardinal  Points  have  been  widely  and  successfully 


192  INDUSTRIAL  GOVERNMENT 

applied;  immediate  demands  such  as  the  forty-four- 
hour  week  and  "direct  action"  have  been  met  as  they 
arose  and  plans  have  been  put  into  operation  to  remedy 
some  of  the  more  fundamental  problems  which  have 
been  undermining  the  industry.  Through*  joint  effort, 
the  first  scientific  and  comprehensive  statistics  covering 
the  field  of  apprenticeship  have  been  gathered  and  point 
to  the  possibility  of  building  up  within  the  craft  a 
joint  statistical  service.  Scientific  collective  bargaining 
has  been  demonstrated.  Under  the  slogan  of  "stand- 
ardization and  stabilization"  there  is  much  that  can 
be  accomplished  in  the  future  for  a  business  which  has 
been  the  victim  of  competition  and  extreme  individual- 
ism. Radical  trade  unionists  and  radical  open  shop 
employers  will  fight  the  Council.  Its  success  will  de- 
pend upon  the  maintenance  of  the  balance  of  power 
and  the  realization  by  both  employers  and  unions  that 
their  ultimate  welfare  is  dependent  on  the  prosperity 
of  the  industry.  It  has  still  to  meet  other  tests  in 
an  era  of  falling  prices  and  unemployment.  During 
the  period  when  labor  had  the  upper  hand,  the  rank 
and  file  of  the  employers  were  willing  to  accept  the 
benefits  secured  for  them  by  the  Council,  but  whether 
or  not  they  will  continue  to  put  into  practice  its  ideal 
in  their  new  position  of  power  is  still  a  problem  of  the 
future.  Also,  labor  has  still  to  prove  its  willingness  to 
accept  wage  reductions  in  proportion  to  the  decrease 
in  the  cost  of  living. 


XVI 
DUE  PROCESS  OF  LAW 

PROCEDURE 

In  a  small,  rectangular  room  on  the  second  floor 
of  their  central  factory,  Hart,  Schaffner  &  Marx  and 
their  employees  hold  court.  A  window  opens  on  the 
commerce  of  Monroe  Street;  through  the  often  open 
door  the  conversation  of  the  halls  and  offices  comes  in. 
At  the  head  of  a  plain  table  sits  a  big  man  with  a 
VanDyke  beard,  a  strong  voice  and  a  strong,  under- 
standing face,  Mr.  Mullenbach,  chairman  of  the  Trade 
Board.  Mr.  Mullenbach  is  umpire,  paid  equally  by 
union  and  company.  His  position  is  that  of  a  judge  in 
a  court  of  original  jurisdiction.  All  day  he  adjusts  the 
rival  claims  of  company  and  "people" ;  keeping  indus- 
trial warfare  from  becoming  anything  more  than 
verbal  conflict;  turning  out  good-will  for  firm  and 
people. 

On  the  six  floors  above  and  in  three  other  buildings 
in  the  city,  the  republic  of  eight  thousand  people,  for 
whom  this  court  dispenses  justice,  carries  on  its  work. 
On  the  top  floor  the  cloth  is  stored.  On  the  floor  below 
men  are  at  work  examining  it  and  shrinking  it,  as  it 
is  unrolled,  and  then  hanging  it  in  long,  movable 
frames,  set  next  to  a  high  ceiling  to  dry.  In  a  high, 
well-lighted  relatively  quiet  room,  the  cutters  lay  out 

193 


194  INDUSTRIAL  GOVERNMENT 

their  patterns  in  such  a  way  as  to  waste  no  cloth,  chalk 
around  them,  and  cut  their  "lays,"  either  with  a  hand 
tool  or  an  electric  machine.  They  are  the  aristocrats 
of  the  industry.  Before  the  time  of  the  Amalgamated 
Clothing  Workers  of  America  they  would  have  scorned 
to  ally  themselves  with  the  less  skilled  stitchers  and 
pressers,  spongers,  buttonhole  makers  and  helpers, 
who,  with  seventy  other  subdivisions  of  workers,  make 
up  the  members  of  the  union.  In  another  room*  women 
are  stitching  at  long  rows  of  clattering  machines;  on 
piece  work,  their  hands  flying  so  fast  that  the  eye 
cannot  follow  them. 

For  all  these  workers  and  their  fellows,  and  for 
their  employers,  the  court  below  is  the  protector  of 
rights  and  the  enforcer  of  duties  in  those  matters  which 
affect  their  welfare  most  vitally,  matters  of  the  daily 
job.  Under  the  agreement  which  is  the  constitution 
of  the  republic,  the  Trade  Board  is  the  first  agency  to 
determine  the  conditions  under  which  a  man  is  entitled 
to  possess  his  job,  and  the  wages  and  conditions  of 
work  which  he  may  claim  under  the  contract. 

A  case  occurred  in  which  a  minor  union  official  was 
brought  to  trial,  charged  with  being  a  "trouble  maker." 
He  held  two  positions  in  the  plant.  For  the  union  he 
was  a  "shop  chairman."  He  earned  his  living  by  work- 
ing for  Hart,  Schaffner  &  Marx,  as  a  tailor.  His 
position  with  the  union  involved  taking  up  grievances 
of  workers  in  his  shop  with  their  foremen.  If  ques- 
tions are  not  settled  in  this  way,  they  are  taken  to 
union  deputies,  paid  officials  of  the  union,  not  neces- 
sarily in  the  company's  employ.  These  men  try  to 
settle  matters  by  conference  with  the  representatives 
of  the  company — "company  deputies."    Failing  settle- 


DUE  PROCESS  OF  LAW  195 

ment  by  any  of  these  methods,  a  cause  of  action  comes 
before  the  Trade  Board.  A's  position  is  that  of  the 
famous  "shop  steward"  in  England.  He  is  also  the 
man  whom  the  open  shop  employers  have  in  mind 
when  they  say  they  will  deal  only  with  representatives 
of  their  own  employees. 

In  this  case  the  company  had  lodged  complaint 
against  A  with  the  Trade  Board.  The  action  petitioned 
for  was  his  removal  from  his  position  as  shop  chair- 
man. Under  the  agreement,  a  shop  chairman  may  not 
be  discharged  by  the  company,  nor  may  he  lose  his 
union  position  except  after  trial  by  the  Trade  Board. 

A  was  charged  with  being  a  "trouble  maker."  A 
squat,  square-headed,  white-faced,  phlegmatic  Jew,  he 
sat  and  listened  to  his  trial.  Next  to  him  at  the  table 
sat  two  tailors  from  his  shop,  picked  at  random,  the 
only  members  of  the  Trade  Board  of  eleven,  as  origi- 
nally constituted,  besides  the  chairman,  whom  either 
side  had  found  it  worth  while  to  have  present.  They 
were  there  to  answer  questions  and  watch  proceedings. 
The  Trade  Board  was  originally  organized  as  a  body 
composed  of  five  union  representatives,  five  company 
representatives  and  an  impartial  chairman,  but  it  no 
longer  functions  as  a  joint  council.  Both  sides  are 
interested  only  in  Mr.  Mullenbach's  decision  and  their 
Trade  Board  representatives  have  ceased  to  meet. 
Next  to  the  tailors  sat  the  two  union  deputies  who  were 
conducting  the  case  for  A,  one  a  soft-eyed  man  with 
a  sharp  tongue  and  a  refined,  peculiarly  oriental  face; 
the  other  a  Russian  bulldog.  At  the  end  of  the  table 
Mr.  Mullenbach  presided.  On  his  left  the  dark,  keen 
deputy  for  the  company  carried  on  the  prosecution. 

The  first  witness,  a  fiery  Jew,  foreman  in  the  de- 


196  INDUSTRIAL  GOVERNMENT 

fendant's  shop,  testified  that  A  had  refused  him  "any 
satisfaction"  in  the  case  of  a  stitcher  who  was  doing 
bad  work;  and  that  \vhen  the  witness  insisted  on  taking 
the  matter  up  with  the  superintendent,  A  had  said 
"I'm  through  with  you,"  hinting  at  trouble  ahead 
among  the  foremen's  workers.  The  foreman  gave 
testimony  also  to  convict  A  of  lying  in  order  to  gain 
recruits  for  the  union.  In  a  cross  examination  of  the 
witness  by  the  union  deputies,  an  instance  of  bad  lan- 
guage used  by  him  within  hearing  of  women  came  to 
light,  and,  lawyer-like,  the  union  deputies  pounced  on 
the  item  to  discredit  the  character  of  the  witness.  Ex- 
aminations of  witnesses  occupied  the  better  part  of 
two  mornings  and  eight  or  ten  men  and  women  gave 
full  testimony  as  to  the  activities  and  character  of  the 
accused.  The  types  examined  ranged  from  the  Irish 
"forelady"  who  "always  cried  when  she  got  mad," 
"but  always  apologized  when  she  told  a  girl  to  shut 
up,"  knowing  it  to  be  unladylike,  to  the  stolid  next 
neighbor,  who  didn't  know  anything  to  A's  discredit. 
In  the  course  of  proceedings  the  people  in  A's  shop 
ask'ed  for  a  postponement  of  the  hearing  and  during 
the  interval  they  disposed  of  the  case  by  deposing  A 
and  electing  a  substitute. 

The  case  described  is  typical  of  the  great  number 
of  actions  that  come  before  the  Trade  Board,  in  that 
most  of  them  relate  to  discipline.  No  one  can  be  dis- 
charged by  foreman  or  superintendent  directly.  The 
labor  department,  directed  by  Professor  Earl  Dean 
Howard,  formerly  of  the  economics  department  in 
Northwestern  University,  must  give  its  consent  to  a 
dismissal.    But  after  dismissal  the  worker  may  appeal 


DUE  PROCESS  OF  LAW  197 

to  the  Trade  Board  for  reinstatement,  and  many  such 
appeals  are  made. 

This  case  got  no  further  than  the  Trade  Board. 
The  union  deputies  might,  however,  have  had  it  ap- 
pealed had  it  gone  against  them,  to  a  higher  tribunal. 
This  tribunal  is  the  Board  of  Arbitration,  composed 
theoretically  of  the  company's  lawyer,  the  union's  law- 
yer, and  Mr.  Tufts,  Professor  of  Philosophy  in  the 
University  of  Chicago,  but  practically  of  Mr.  Tufts. ^ 
Mr.  Tufts  acts  also  as  a  supreme  court  for  the  other 
men's  clothing  houses  in  Chicago  which  have  installed 
a  similar  system.-  The  board  is  therefore  a  court  of 
appeals  for  35,000  workers.  Its  members,  like  the 
members  of  the  Trade  Board  and  the  company  and 
union  officials,  may  act  further  on  administrative  com- 
missions for  Hart,  Schaffner  &  Marx  to  determine 
interpretations  of  the  agreement  or  to  legislate  on 
doubtful  issues  between  company  and  people. 

*  Owing  to  the  resignation  of  Mr.  Tufts,  Professor  H.  A. 
Millis,  of  the  Economics  Department  of  the  University  of  Chi- 
cago has  been  elected  to  fill  his  place. 

'  Mr.  Williams,  the  first  professional  arbitrator,  was  a  uni- 
versally honored  father  of  the  republic.  He  is  spoken  of  by 
a  member  of  the  business  as  "the  wisest  man  I  ever  knew." 
Born  in  Wales,  he  emigrated  to  Streator,  Illinois,  at  the  age  of 
eleven.  He  worked  in  a  coal  mine  near  Streator  until  he  was 
twenty-six  years  old.  As  a  laborer  he  gave  himself  something 
of  an  education.  Among  other  activities  he  organized  a  read- 
ing class,  in  which  he  first  became  acquainted  with  the  work  of 
J.  S.  Mill.  At  twenty-six  he  left  the  mines,  and  became  suc- 
cessively newspaper  reporter,  insurance  agent,  theatrical  man- 
ager and  composer,  a  vice-president  of  the  Drama  League  of 
America,  and  a  leader  in  the  Unitarian  Church.  In  1909  he 
secured  compensation  for  the  Cherry  Mine  sufferers  from  the 
C.  M.  &  St.  P.  Ry.  From  1910  until  1914  he  was  arbitrator 
for  the  United  Mine  Workers  of  Illinois  and  the  operators. 
From  1914  until  his  death,  in  the  early  part  of  January,  1918, 
h'e  was  arbitrator  for  Hart,  Schaffner  &  Marx.  Mr.  Williams 
was  a  philosopher  and  a  judge;  a  believer  in  trade  unionism; 
and  in  the  application  of  reason  to  the  discovery  of  means  to 
serve  the  common  social   interests   of   workers   and  employers. 


198  INDUSTRIAL  GOVERNMENT 

In  the  afternoon  following  the  first  part  of  A*s 
trial,  the  "court  room"  was  occupied  by  a  meeting  of 
the  Board  of  Arbitration.  On  this  particular  after- 
noon Mr.  Tufts  represented,  as  usual,  the  board.  The 
board  "met"  as  a  commission,  the  "trimmers'  commis- 
sion," rather  than  as  a  court;  primarily  to  argue  the 
knotty  question  of  what  constitutes  a  fair  day's  work. 
Four  union  representatives  were  present,  three  regular 
workmen,  led  by  the  bulldog  who  had  defended  A  in 
the  morning.  Three  men  represented  the  company. 
The  two  who  led  the  discussion  were  the  company's 
prosecutor  of  the  morning,  and  a  clear-headed,  clear- 
faced  young  accountant,  a  law  student  of  the  Uni- 
versity of  Chicago. 

Before  the  discussion  of  the  fair  day's  work  ques- 
tion, the  meeting  had  been  considerably  warmed  up  by 
a  short  argument  on  another  issue  pending  before  the 
board,  the  issue  of  the  number  of  workmen  Hart, 
Schaffner  &  Marx  ought  to  take  on  to  supply  a  demand 
for  clothes,  which,  as  the  company  agreed,  was  tem- 
porarily inflated.  Mr.  Strauss,  the  head  of  the  pro- 
duction department,  a  member  of  the  Board  of  Direc- 
tors, had  testified.  The  "people's"  delegates  had  in- 
sisted that  some  assurance  should  be  given  that  the 
lay-ofif,  expected  to  follow  the  boom,  would  not  in- 
volve all  of  the  usual  unmitigated  hardships  of  unem- 
ployment for  the  men  turned  out.  No  .conclusion  was 
reached,  and  in  the  heat  of  the  argument  there  was 
visible  a  final  source  of  disagreement  and  dissension 
between  the  parties.  Each  was  determined  that  its 
view  should  be  accepted.  Several  times  the  chairman, 
Mr.  Tufts,  a  nervous,  rugged  man,  brought  quiet  out 


DUE  PROCESS  OF  LAW  199 

of  the  confusion  of  shouting  disputants  with  a  request 
for  order  or  by  a  sensible  suggestion. 

The  question  of  what  constitutes  a  fair  day's  work 
arose  particularly  in  connection  with  the  "trimmers" 
who  do  various  types  of  work  auxiliary  to  that  of  the 
cutters.  The  company  claimed  that  the  trimmers  were 
not  giving  a  fair  day's  work  for  what  was  admittedly 
a  fair  day's  wage.  The  union  deputies  insisted  on  the 
exclusion  from  the  discussion  of  the  question  of  a  rig- 
idly set  fair  day's  work  as  determined  by  time  studies. 
Banging  his  hand  on  the  table  for  emphasis,  the  bull- 
dog deputy  shouted  that  whatever  might  be  determined 
in  the  meeting,  his  people  would  not  stand  for  the 
settlement  of  a  standard  by  any  such  means.  The 
afternoon  was  spent  largely  in  the  presentation  of 
figures  by  the  company's  accountant  tending  to  show 
a  falling  off  in  production  in  the  trimming  rooms,  and 
the  detailed  criticism  of  these  figures  by  the  union 
deputies  and  Mr.  Tufts. 

DISCIPLINE 

This  account  of  the  operation  of  the  agreement  dur- 
ing a  typical  day  at  the  Hart,  Schaffner  &  Marx  factory 
will  serve  as  a  description  of  procedure,  and  a  back- 
ground to  the  discussion  of  the  elements  of  industrial 
law  here  and  elsewhere.  It  is  to  be  noted  that  many 
schemes  of  "industrial  democracy"  involve  no  such 
provision  for  judicial  government  as  is  here  described, 
and  that  practitioners  and  proponents  of  these  schemes 
believe  them  more  efficient  than  a  system  based  on  liti- 
gation. Safety  committees  illustrate  one  extreme  of 
non-litigious  industrial  government.     Such  plans  for 


200  INDUSTRIAL  GOVERNMENT 

constructive  and  forward-looking  planning  as  that  of 
the  closed  shop  Building  Trades  Parliament  of  Eng- 
land, and  the  open  shop  White  Motor  Company,  of 
Cleveland,  illustrate  the  other  extreme.  But  in  such 
industrial  governments  as  those  conforming  roughly 
to  the  Leitch  plan,  those  of  the  joint  council  type,  and 
those  providing  frankly  for  arbitration  as  the  main 
agency  of  regulation,  whether  under  governmental  or 
private  control — in  these  American  types  it  is  believed 
that  the  rulings  of  governmental  agencies  may  conven- 
iently be  grouped  under  two  heads — discipline  and  the 
wage  contract.  The  development  under  the  Hart, 
Schafifner  &  Marx  constitution  of  rules  relating  to  these 
subjects  may,  within  these  limits,  be  taken  as  illustra- 
tive of  the  growth  of  industrial  law. 

The  rule  with  regard  to  discipline  and  discharge  is 
thus  stated  in  the  Agreement  or  "Constitution" :  "The 
full  power  of  discharge  and  discipline  rests  with  the 
company  and  its  agents,  but  it  is  understood  that  this 
power  should  be  exercised  with  justice  and  with  due 
regard  to  the  reasonable  rights  of  the  employee,  and, 
if  an  employee  feels  that  he  has  been  unjustly  dis- 
charged, he  may  appeal  to  the  Trade  Board,  which  shall 
have  the  power  to  review  the  case."  All  discharges, 
whether  appealed  or  not,  must  be  passed  on  by  Mr. 
Howard,  the  employment  manager.  The  judicial  inter- 
pretation of  the  general  ruling  of  the  Agreement  has 
led  to  the  employment  of  the  greatest  possible  leniency 
in  dealing  with  cases  of  discharge.  Thus,  in  a  case 
which  reached  the  Board  of  Arbitration  involving  the 
discharge  of  a  cutter  for  inefficiency,  Mr.  Williams 
ruled  that  the  burden  of  proof  is  on  the  company  to 
show  such  a  falling  off  in  work  as  to  warrant  a  dis- 


DUE  PROCESS  OF  LAW  201 

charge.  In  the  case  in  question  the  company  was  held 
not  to  have  sustained  the  burden  and  the  cutter  was 
reinstated.  In  another  case  the  Trade  Board  decision 
refers  to  the  fact  that  the  ruHng  of  the  Agreement  that 
any  worker  who  strikes  or  incites  others  to  strike  dur- 
ing working  hours  "shall  be  subject  to  suspension, 
discharge  or  fine"  has  been  generally  disregarded  by 
judgments  of  the  boards;  and  in  this  case  the  Trade 
Board  ordered  the  reinstatement  of  some  armhole 
basters  who  had  participated  in  a  stoppage. 

To  compensate  it  for  the  employment  of  this  rule 
of  leniency,  which  is,  of  course,  carried  to  no  ridicu- 
lously logical  extreme,  the  company  enjoys  the  full  co- 
operation of  the  union  in  maintaining  discipline  and 
restoring  order  after  stoppages.  Thus  in  the  case  of 
a  serious  stoppage  in  the  cutting  and  trimming  depart- 
ments in  May  of  19 17,  as  well  as  in  a  similar  more 
recent  case,  a  condemnation  of  the  action  of  the  highly 
skilled  workers  involved,  and  an  appeal  to  the  union 
leaders,  who  in  turn  effectively  appealed  to  the  work- 
ers, proved  in  the  hands  of  the  Board  of  Arbitration 
a  sufficient  remedy.  In  the  small  stoppages  which  oc- 
casionally occur  in  the  various  plants,  the  results  of 
minor  disputes,  the  intervention  of  an  every  ready 
union  deputy  or  two  restores  order. 

The  strength  of  the  union  is  thus  recognized  through- 
out the  agreement  as  a  foundation  for  the  strength  of 
the  shop  government.  Further,  the  agreement  recog- 
nizes the  importance  of  maintaining  union  discipline. 
"The  Trade  Board  and  Board  of  Arbitration  are 
authorized  to  hear  complaints  from  the  union  concern- 
ing the  discipline  of  its  members  and  to  take  any  action 
necessary  to  conserve  the  interests  of  the  agreement." 


202  INDUSTRIAL  GOVERNMENT 

Accordingly,  it  was  ruled  in  one  case  that  girls,  mem- 
bers of  the  union,  must  pay  their  union  assessments 
under  penalty  of  discharge.  In  another  case,  involv- 
ing a  question  of  strengthening  the  union  position,  it 
was  ruled  that  the  jurisdiction  of  the  union  should  be 
extended  to  include  the  inspectors  in  a  certain  depart- 
ment. The  company's  interest  in  efficient  and  indepen- 
dent executives  was  to  be  protected  by  special  favor 
in  cases  involving  the  application  of  the  preferential 
shop  principle  to  these  inspectors.  That  is,  the  com- 
pany was  not  to  be  unduly  restricted  from  the  hiring 
and  retention  of  good  non-union  inspectors. 

The  "government"  also  claims  an  interest  in  union 
regulations.  The  agreement  says  :  "The  provisions  for 
preference  made  herein  require  that  the  door  of  the 
union  be  kept  open  for  the  reception  of  non-union 
workers.  Initiation  fee  and  dues  must  be  maintained 
at  a  reasonable  rate,  and  any  applicant  must  be  ad- 
mitted who  is  not  an  offender  against  the  union  and 
who  is  eligible  for  membership  under  its  rules.  Pro- 
vided, that  if  any  rules  be  passed  that  impose  an  un- 
reasonable hardship,  or  that  operate  to  bar  desirable 
persons,  the  matter  may  be  brought  before  the  Trade 
Board  of  Arbitration  for  such  remedy  as  it  may  deem 
advisable."  Accordingly,  it  was  successfully  contended 
by  the  company  in  one  case  that  the  imposition  of  an 
initiation  fee  of  $ioo  for  an  individual,  whom  the 
union  claimed  to  be  disciplining  for  past  offences 
against  the  union,  violated  the  provision  of  the  agree- 
ment; and  the  plea  of  the  union  that  the  fee  as  im- 
posed was  ninety-five  per  cent  penalty  and  five  per  cent 
initiation  charges  was  disallowed.  Similarly,  the  Trade 
Board  has  held  that  collections  may  be  made  in  the 


DUE  PROCESS  OF  LAW  203 

shop  only  with  the  consent  of  the  two  chief  union 
deputies.  The  ruHng  is  intended  to  prevent  the  prac- 
tice of  oppressive  and  extortionate  charity  in  favor 
of  popular  men,  as  well  as  the  illicit  accumulation  of 
strike  funds. 

The  discipline  of  workers  is  further  regulated  by  the 
ruling,  laid  down  in  the  agreement  and  enforced  in 
the  decisions,  that  the  company  and  company  officials 
are  subject  to  supervision  by  the  two  courts  in  matters 
affecting  their  relations  with  the  workers,  and  subject 
to  discipline  in  the  same  way  as  the  workers.  "The 
company's  officials  are  subject  to  the  law  as  are  the 
workers,  and  equally  responsible  for  loyalty  in  word 
and  deed,  and  are  subject  to  discipline  if  found  guilty 
of  violation.  Any  complaints  against  them  must  be 
made  and  adjudicated  in  the  regular  manner.  They 
are  to  respect  the  workers  and  be  respected  by  them 
in  their  position,  and  supported  in  the  proper  discharge 
of  their  duties."  Accordingly,  when  the  "people"  pe- 
titioned for  the  penalization  of  the  company  for  the 
use  of  a  blackboard  to  designate  off-pressers  who  fell 
off  in  production,  the  petition  was  denied  not  on  the 
ground  that  such  a  measure  as  the  one  complained  of 
was  justifiable  and  ought  not  to  be  punished,  but  on  the 
ground  that  it  had  been  met  by  a  stoppage  of  the  off- 
pressers  which,  as  a  breach  of  the  agreement  on  their 
part,  ought  to  be  punished  by  a  denial  of  redress  from 
the  company.  It  is  expressly  provided:  "If  any  fore- 
man, superintendent  or  agent  of  the  company  shall 
wilfully  violate  the  spirit  of  this  agreement  and  espe- 
cially if  he  fails  to  observe  and  carry  out  any  decision 
of  the  Trade  Board  or  Board  of  Arbitration,  he  shall, 
if  charge  is  proved,  be  subject  to  a  fine  of  not  less  than 


204  INDUSTRIAL  GOVERNMENT 

$io  or  more  than  $ioo  for  each  offense,  at  the  discre- 
tion of  the  chairman  of  the  Trade  Board."  In  one 
case  a  fine,  imposed  by  the  Trade  Board  on  a  superin- 
tendent for  failure  to  carry  out  certain  minor  arrange- 
ments in  his  shop  to  which  he  had  agreed  with  a  union 
deputy,  was  removed  on  appeal  by  the  Board  of  Arbi- 
tration, on  the  ground  that  it  was  not  shown  that  there 
had  been  any  "wilfull  and  intentional"  violation.  The 
superintendent  was  let  off  with  a  reprimand  for  his 
negligence. 

The  principle  of  the  preferential  shop,  a  device  char- 
acteristic of  the  clothing  trade,  designed  to  give  the 
workers  the  maximum  security  consistent  with  the 
maximum  labor  market  for  the  employer,  and  to 
strengthen  the  union  power  without  unduly  weakening 
the  company,  is  thus  stated:  "Preference  shall  be  ap- 
plied in  hiring  and  discharge.  Whenever  the  employer 
needs  additional  workers  he  shall  first  make  application 
to  the  union,  specifying  the  number  and  kind  of  work- 
ers needed.  The  union  shall  be  given  a  reasonable 
time  to  supply  the  specified  help,  and  if  it  is  unable,  or 
for  any  reason  fails  to  furnish  the  required  people, 
the  employer  shall  be  at  liberty  to  secure  them  in  the 
open  market  as  best  he  can.  In  like  manner,  the  prin- 
ciple of  preference  shall  be  applied  in  case  of  discharge. 
Should  it  at  any  time  become  necessary  to  reduce  the 
force  in  conformity  with  the  provisions  of  this  agree- 
ment the  first  ones  to  be  dismissed  shall  be  those  who 
are  not  members  of  the  union  in  good  and  regular 
standing." 

It  has  been  held  that  in  the  case  of  a  shutdown  of 
an  entire  factory,  the  preferential  principle  is  tO'  be 
applied  as  requiring  the  transfer  of  union  men  to  the 


DUE  PROCESS  OF  LAW  205 

operating  factories  at  the  expense  of  the  non-union 
men  employed  there.  It  has  also  been  held  that  where 
changes  in  the  volume  of  production  necessitate  the 
making  of  transfers  at  such  disadvantageous  terms  as 
to  produce  quitting  and  to  amount^  in  fact,  to  a  lay-off, 
the  preferential  principle  is  to  apply. 

The  seniority  principle  is  thus  recognized  and  ap- 
plied. "If  in  order  to  properly  balance  a  section,  a 
reduction  of  force  be  required  greater  than  can  be 
secured  by  the  laying  off  of  non-union  workers,  as 
provided  for  herein,  then  there  may  be  laid  off  those 
who  are  members  of  the  union  in  the  order  of  their 
seniority  who  have  been  in  the  employ  of  the  company 
for  a  period  of  six  months  or  less,  provided  that  any 
exceptionally  efficient  worker,  or  any  especially  val- 
uable member  of  the  union,  may  be  exempted  from  the 
rule  of  seniority.  Provided,  also,  the  company  shall 
give  notice  to  the  chief  deputy  of  its  intention  to  dis- 
charge under  this  clause,  and  if  he  fails  to  agree,  the 
matter  shall  be  referred  to  the  Trade  Board."  It  has 
been  held,  also,  in  accordance  with  the  contention  of  the 
people  before  the  Trade  Board,  that  where  the  quality 
of  work  done  by  two  men  is  shown  to  be  equal,  the 
man  older  in  service  is  to  be  given  preference  in  pro- 
motion. 

The  provisions  with  regard  to  seniority  and  the 
preferential  shop  affect  discipline  in  two  ways.  They 
prevent,  to  a  large  extent,  arbitrary  discrimination, 
and  they  strengthen  the  union,  both  as  a  cooperating 
and  as  a  contesting  agent. 

The  policy  adopted  by  the  government  of  Hart, 
Schaffner  &  Marx  in  dealing  with  that  special  class  of 
discipline  cases  involving  union  officials  has  already 


2o6  INDUSTRIAL  GOVERNMENT 

been  indicated.  Shop  chairmen,  unlike  the  workers, 
may  not  be  discharged  except  after  trial  and  reduction 
from  office  by  the  Trade  Board.  Transfers  of  shop 
chairmen  for  purposes  of  discipline  are  also  discour- 
aged. Little  trouble  is  recorded  in  dealing  with  the 
deputies,  the  extra  factory  officials  of  the  union.  These 
men  are  in  constant  opposition  to  the  company  deputies 
in  presenting  the  claims  of  their  clients  and  constitu- 
encies before  the  courts.  Yet  the  interests  of  union  and 
company  in  the  success  of  their  joint  government  have 
been  so  unified  by  the  development  of  its  constitution 
that  union  officials  and  company  representatives  alike 
exert  themselves  to  the  limit  to  keep  the  machinery  run- 
ning smoothly. 

The  great  majority  of  the  cases  which  arise  in  the 
factories  are  cases  involving  routine  matters  of  disci- 
pline. These  take  the  form  of  appeals  from  discharges 
or  suspensions  by  the  employment  department,  or  with 
regard  to  any  of  the  possible  punishments  imposed  for 
breach  of  duty.  These  penalties  comprise  fines,  sus- 
pensions, the  disallowance  of  back  pay  between  the 
time  suspended  and  the  time  reinstated,  transfers,  loss 
of  lay-off  credit,  and  extra  lay-offs  at  dull  times. 

Sufficient  grounds  for  discharge  are:  poor  work, 
disobedience,  taking  part  in  a  stoppage,  cheating,  ab- 
sence without  excuse,  and  violent  conduct  or  language. 
Under  its  general  rule  of  giving  the  workers  the  maxi- 
mum security  consistent  with  the  maintenance  of  pro- 
duction, the  Trade  Board,  wherever  possible,  reinstates 
discharged  workers  who  appeal.  But  it  does  not  hesi- 
tate to  impose  lesser  penalties  nor  to  confirm  discharges 
ordered  on  sufficient  provocation.  Thus,  on  petition 
of  the  people,  a  man  who  had  been  discharged  for  a 


DUE  PROCESS  OF  LAW  207 

refusal  to  cut  with  a  machine,  or  "operate  a  machine 
lay"  as  it  is  called,  was  in  one  case  reinstated  without 
penalty.  He  said  the  machine  made  him  nervous,  and 
as  there  was  plenty  of  hand  work  to  go  around,  the 
Trade  Board  held  there  was  no  reason  to  require  his 
employment  at  a  machine.  Had  the  case  involved  an 
effort  to  restrict  output,  the  decision  would  undoubtedly 
have  been  different.  On  the  other  hand,  a  man  who 
had  refused  to  report  for  an  interview  with  the  superin- 
tendent of  his  shop  without  the  protection  of  an 
accompanying  shop  chairman,  and  had  consequently 
been  discharged  for  insubordination  was  ordered  rein- 
stated, but  without  back  pay  for  the  time  lost.  And  in 
another  case,  reinstatement  was  refused  to  a  baster, 
who  had  been  discharged  for  starting  a  stoppage  dur- 
ing a  time  of  suspension  imposed  for  insubordination. 

Transfers  are  used  in  the  regular  way  to  enforce 
discipline.  A  man  may  be  transferred  from  week  to 
piece  work  if  his  production  is  unsatisfactory.  But 
such  transfers  are  subject  to  court  review,  and  it  has 
been  held  by  the  Board  of  Arbitration  that  where  a 
"youth  has  been  transferred  without  adequate  reason 
to  his  own  injury"  he  may  be  reinstated  by  the  Trade 
Board. 

The  courts  further  take  a  hand  in  settling  minor 
quarrels  and  disputes  in  the  shop.  One  worker  was 
recently  ordered  by  the  Trade  Board  to  apologize  to 
another  for  calling  him  a  liar.  It  was  remarked  that 
it  is  "to  the  interest  of  the  people  to  have  squabbles  set- 
tled in  public." 

Thus,  in  a  rough  way,  justice  is  done  without  too 
keen  philosophical  inquiries,  and  with  more  regard 
to  equity  than  precedent.     It  is  accepted  that  an  able 


2o8  INDUSTRIAL  GOVERNMENT 

investigator,  supported  by  company  and  worker,  will 
devise  means  for  serving  the  interests  of  both.  The 
elimination  of  friction  and  the  injustices  of  insecurity 
is  designed  to  assure  to  the  company  cooperation  in 
production;  and  to  the  workers  stability  of  life  and 
opportunity  to  progress. 

THE    WAGE    CONTRACT 

In  the  development  of  industrial  law,  an  interesting 
set  of  cases  arises  over  the  various  traditional  union 
policies  of  interfering  with  production.  These  poli- 
cies had  their  justification  in  the  attempt  to  make  the 
workers  secure  in  the  tenure  of  their  jobs  and  guard 
them  against  the  gradual  change  of  standards  ex- 
pressed and  Implied  in  trade  agreements.  They  in- 
volved an  effort  to  standardize  conditions  of  work 
through  the  limitation  of  output,  the  elimination  of 
piece  work  and  differential  rates,  the  regulation  of 
practices  connected  with  the  introduction  of  new  ma- 
chinery, and  the  limitation  of  apprenticeship.  The 
conflicts  of  interest  presented  by  these  policies  have 
been  dealt  with  by  agreement  and  decision  under  the 
government  of  Hart,  Schaffner  &  Marx,  and  satisfac- 
tory compromises  developed. 

Thus  It  is  agreed  on  both  sides  that  the  company 
is  entitled  to  a  "fair  day's  work  for  a  fair  day's  wage." 
Three  men  were  fined  $5  each  for  organizing  a  con- 
spiracy to  restrict  output  in  the  back-making  depart- 
ment. In  order  to  get  an  increase  in  the  piece  rates  in 
force  there.  They  were  not  discharged  because  the 
union  officials  acted  "coui  ageously  and  intelligently" 
in  helping  to  bring  them  to  trial. 


DUE  PROCESS  OF  LAW  209 

The  union,  on  the  other  hand,  contends — and  thus 
far  successfully — that  a  "fair  day's  work"  cannot  be 
construed,  under  the  agreement,  to  call  for  greater 
production  in  any  department  than  was  being  secured 
at  the  time  the  agreement  was  entered  into.  Any  at- 
tempt to  hold  workers  up  to  a  standard  above  this 
point  as  determined,  for  instance,  by  time  studies, 
would  be  regarded  by  them  as  an  infraction  of  the 
agreement.  The  argument  is  that  the  amount  of  work 
that  may  be  demanded  under  the  contract  is  deter- 
mined, in  the  absence  of  specific  stipulations,  by  the 
trade  custom  at  the  time  when  the  contract  was  entered 
into. 

Within  these  limits,  the  determination  of  contro- 
versies involving  questions  of  reduced  output  is  left 
to  a  system  of  commissions.  The  difficulty  of  deal- 
ing with  the  problem  without  such  a  system  is  recog- 
nized in  the  following  decision  of  Mr.  Williams. 

"On  these  questions  of  measurement  of  work  I  feel  that 
the  company  takes  the  soundest  attitude.  It  is  anxious  to 
agree  with  the  union  on  some  plan  of  judging  work  that 
will  remove  doubt  and  enable  them  to  make  a  fair  estimate 
of  output.  The  union  has  thus  far  shown  no  disposition 
to  cooperate  in  agreeing  on  such  a  plan.  The  present  state 
of  suspicion,  of  charges  of  slacking  on  the  one  side  and 
of  speeding  on  the  other,  is  the  inevitable  result  of  such  a 
planless  situation.  The  burden  of  the  situation  falls  with 
greatest  weight  on  the  company,  for  it  is  driven  to  try  to 
secure  an  adequate  output  through  the  rather  difiticult  and 
uncertain  mechanism  of  trial  boards.  With  the  best  of 
intention  an  arbitrator  finds  himself  hampered  in  doing 
justice  on  the  question  of  output,  because  he  cannot  grasp 
the  inner  facts  with  any  accuracy,  and  is  obliged  to  depend 
largely  on  the  assertion  of  interested  parties  all  keenly 
keyed  up   in  a  verbal   combat  and  eager   for  victory.     If 


2IO  INDUSTRIAL  GOVERNMENT 

the  judicial  method  of  settling  disputes  about  output  is  to 
survive  and  be  efficient.  I  feel  very  sure  we  will  need  to  de- 
velop a  rational  plan  or  method  for  enabling  us  to  form  a 
correct  judgment  of  work  done;  otherwise  the  award  will 
be  a  guess,  based  on  assertion,  expediency,  sympathy,  author- 
ity— anything  except  enlightened  judgment. 

"It  may  be  granted  that  this  is  a  difficult  task  to  impose 
on  the  employer,  and  it  is  possible  that  it  may  prove  to  be 
the  weak  spot  in  the  attempt  to  secure  efficiency  by  arbi- 
tration, unless  some  satisfactory  method  of  measuring  out- 
put can  be  adopted.  But  as  at  present  conducted  under  the 
agreement  it  is  the  requirement  the  arbitrator  must  impose 
on  the  company.  It  must  present  definite  evidence  that  a 
man's  deficiency  in  output  has  been  caused  by  some  delin- 
quency of  his  own.  In  the  present  instance  the  company 
has  not  been  able  to  present  such  a  clear  and  convincing 
body  of  evidence  to  the  arbitrator,  however  much  it  may 
have  convinced  itself  of  the  delinquency." 

The  first  step  in  the  development  of  the  commission 
system  was  the  establishment  of  the  Cutters'  Commis- 
sion in  19 14.  This  Commission  is  composed  of  "one 
member  of  the  cutters'  union,  one  cutting  room  official 
of  the  company,  and  one  independent  outside  member, 
who  shall  act  only  when  the  other  two  fail  to  agree." 
It  is  appointed  by  the  Trade  Board,  and  Mr.  Mullen- 
bach  is  the  outside  member.  In  the  derision  by  which 
this  institution  was  added  to  the  organization,  it  was 
said: 

"The  appointment  of  a  cutter  and  a  cutting  room  official 
is  made  because  technical  and  practical  knowledge  is  essen- 
tial to  their  work,  and  not  because  it  is  desired  that  opposite 
interests  shall  be  represented.  The  commission  owes  its 
allegiance  primarily  to  the  Board,  and  is  expected  to  act 
fairly  and  impartially  in  the  spirit  of  the  Board,  and  not 
as  representing  partisan  and  opposing  interests.  In  order 
that  the  commission  may  receive  the  support  and  coopera- 


DUE  PROCESS  OF  LAW  211 

tion  of  the  parties  in  interest,  the  company  and  union  are 
invited  to  express  their  approval  or  disapproval  of  the 
Board's  appointees,  the  former  to  pass  on  the  cutting  room 
official,  and  the  latter  on  the  cutter  appointed." 

The  functions  of  the  commission  are  thus  described 
in  the  agreement : 

"The  company  shall  not  reduce  the  wages  of  any  cutter. 
The  company  shall  report  to  the  commission  all  failures  of 
cutters  to  produce  their  quota  of  work  when  in  its  judg- 
ment the  delinquency  is  not  caused  by  the  condition  of  the 
work.  The  commission  shall  investigate  the  matter  and  ad- 
vise with  the  cutter  concerning  it.  At  the  end  of  a  period 
sufficiently  long  to  determine  the  merits  of  the  case,  the 
cutter's  commission  shall,  if  it  deems  necessary,  find  meas- 
ures to  discipline  cutters  to  conform  to  their  production. 
In  judging  the  merits  in  such  instances,  the  commission 
shall  use  the  principle  of  comparative  efficiency," 

An  example  of  the  activity  of  this  commission  and 
an  elaboration  of  its  functions  are  contained  in  a  de- 
cision of  Mr.  WiUiams  rendered  in  May  of  191 7. 

"i.  A  decision  of  the  Cutters'  Commission  reducing  the 
salaries  of  cutters  having  been  appealed  to  the  Board,  a 
difference  of  understanding  as  to  the  meaning  of  the  present 
agreement  has  been  revealed  which  requires  of  this  Board 
a  very  fundamental  decision  covering  the  disputed  points. 

"2.  The  company  may  make  whatever  changes  in  the 
records  of  the  cutter's  efficiency  they  find  most  accurate. 
Whenever  the  company  has  a  complaint  that  a  cutter  is 
using  too  much  time  in  cutting  a  ticket,  it  shall  notify  the 
floor  committee  of  the  Cutters'  Commission,  who  shall  agree, 
if  possible,  on  the  proper  time  for  cutting  such  a  ticket. 
If  they  are  unable  to  agree,  the  case  shall  be  referred  to 
the  chairman  of  the  Cutters'  Commission  on  the  next  day,  at 
a  regular  appointed  time,  for  final  decision. 

"3.  Whenever  the  company  has  complaint  against  any 
cutter  for  laxity  in  cutting,  the  record  of  cutting,  including 


212  INDUSTRIAL  GOVERNMENT 

ticket  passed  upon  by  floor  committees,  shall  be  presented 
to  the  Cutters'  Commission.  As  heretofore,  the  Cutters' 
Commission  shall  be  responsible  for  discipline  of  cutters 
for  laxity,  in  whatever  form  and  degree  it  may  deem  neces- 
sary to  reduce  such  laxity  in  the  cutting  room  to  a  mini- 
mum. The  commission  may  reduce  or  discharge  cutters, 
may  impose  suspension,  immediate  or  deferred,  or  use  such 
other  penalties  or  remedies  as  in  its  judgment  may  be  nec- 
essary to  discipline  and  correct  cutters  with  respect  to  their 
production. 

"4.  The  Cutters'  Commission  shall  appoint  two  persons 
on  each  cutting  floor  to  act  as  floor  committees,  one  selected 
from  among  the  cutters  and  one  selected  from  among  the 
representatives  of  the  company  on  the  floor.  Their  duty 
shall  be  to  pass  judgment  on  the  proper  cutting  time  on 
tickets  which  have  been  complained  of  by  the  company. 
These  floor  committees  shall  be  under  the  jurisdiction  of  the 
Cutters'  Commission, 

"With  respect  to  the  appeal  of  the  union  against  the  re- 
duction of  cutters  which  is  presented  to  this  Board,  the 
Board  is  of  the  opinion  that  the  case  against  the  offenders 
would  not  be  altered  if  tried  by  either  of  the  interpreta- 
tions put  forward  by  the  contending  parties.  The  decision 
of  the  Trade  Board  is  accordingly  affirmed  and  the  reduc- 
tions are  declared  to  stand  as  ordered  by  that  Board." 

A  board  similar,  in  theory,  to  the  Cutters'  Commis- 
sion was  established,  in  19 19,  for  the  trimming  room 
"to  regulate  shop  practice,  heights  of  lays,  etc."  The 
Cutters'  and  the  Trimmers'  Commissions  have  accord- 
ingly charge  of  production  in  the  two  most  important 
week-work  departments.  An  occasion  on  which  the 
latter  commission  met,  under  the  presidency  of  Mr. 
Tufts,  has  been  described.  The  difficulties  into  which 
an  attempt  to  "use  the  principle  of  comparative  ef- 
ficiency" led,  have  been  suggested.     The  company,  at 


DUE  PROCESS  OF  LAW  213 

this  particular  meeting,  held  in  the  summer  of  1919, 
presented  figures  to  show  that  the  ratio  of  cutters  to 
trimmers  had  fallen  from  2.8  :i  in  19 18  to  2  :i  in  19 19, 
and  relied  on  these  figures  to  show  a  falling  off  in  pro- 
duction in  the  trimming  rooms.  The  union  countered 
with  the  contention  that  this  change  was  the  natural 
result  of  the  introduction  of  new  machinery  in  the  cut- 
ting department,  and  of  the  increased  number  of  fancy 
cuts  following  the  close  of  the  war,  and  necessitating 
slower  work  on  the  part  of  the  trimmers.  It  is  by 
the  slow  sifting  of  such  evidence  that  the  commissions 
accomplish  their  results. 

Both  union  and  company  agree  that  the  commission 
system  has  increased  production.  But  there  is  an  im- 
portant difference  of  opinion  as  to  how  much  room 
is  left  for  improvement  by  standardizing  output. 
This  difference  of  opinion  is  given  particular  signifi- 
cance by  three  events.  A  decision  made  by  the  Board 
of  Arbitration  in  December  of  1919  giving  the  cutters 
a  $43  weekly  minimum  wage  provides  that  the  award 
shall  not  interfere  with  the  development  of  standards 
of  production  in  the  various  shops  over  which  the 
Board  has  jurisdiction.  Accordingly,  on  March  2, 
1920,  the  Board  made  a  further  award  granting  the 
cutters  a  $45  minimum  whenever  such  standards  are 
set.  In  the  third  place,  the  last  convention  of  the 
Amalgamated  Clothing  Workers  went  on  record  as  fa- 
voring the  setting  of  production  standards. 

It  thus  became  important  to  know  what  constitutes 
a  standard.  The  Cutters'  Commission  of  the  Hart, 
Schaffner  &  Marx  factories  has  a  system  of  allowances 
by  means  of  which  it  judges  of  a  cutter's  efficiency. 


214  INDUSTRIAL  GOVERNMENT 

Certain  of  the  basic  allowances  for  instance  are  thus 
listed : 

"Scale  for  cuts  including  machine  work" 


Heights 

I 

2 

3 

4 

Under 
15  oz. 

70 

15  oz. 

and 

over 

5 

6 

7 

8 

9 

10 

II 

12 

Allow- 

ances in 

minutes 

60 

60 

75 

100 

no 

120 

130 

140 

150 

160 

170 

180 

Such  basic  allowances  are  accepted  theoretically  by 
union  and  company  members  of  the  commission  alike. 
On  the  other  hand,  there  are  certain  minor  allowances, 
like  three  minutes  for  an  all-around  belt,  which  are  not 
officially  accepted  by  the  commission,  because  of  the 
objection  of  the  union.  These  objections  are  based 
on  the  many  opportunities  for  variation  in  such  opera- 
tions, and  the  alleged  impossibility  of  setting  fair  and 
accurate  standards. 

On  the  basis  of  the  minimum  wage,  a  classification 
of  cutters  has  made  it  possible  theoretically  to  give 
different  grades  of  cutters  different  weekly  wages. 
The  method  by  which  standards  of  production  were 
for  a  time  enforced  was  by  the  reduction  of  slacking 
cutters  from  one  wage  group  to  another.  This  method 
developed  considerable  friction,  and  a  scheme  of  extra 
lay-off,  at  dull  times  for  the  cutters  whose  production 
fell  off,  was  substituted.  Such  a  plan  has  obvious  de- 
fects in  a  busy  period. 


DUE  PROCESS  OF  LAW  215 

At  present  *  the  union  contends  that  standards  have 
been  set  at  Hart,  Schaffner  &  Marx,  and  are  adminis- 
tered by  the  Cutters'  Commission.  They  hold  that 
the  problem  of  their  enforcement  is  a  separate  mat- 
ter. In  short,  they  claim  the  $2  weekly  increase 
granted  in  March,  but  refuse  to  permit  a  change  in 
production  methods. 

The  company  claims,  on  the  other  hand,  that  both 
major  and  minor  allowances  must  be  definitely  agreed 
on  for  the  use  of  the  commission  before  standards  can 
be  said  to  have  been  set.  And,  in  the  second  place, 
the  labor  department  contends  that  standards  have  not 
been  installed,  within  the  meaning  of  the  decision  of 
March  2nd,  until  an  effectual  means  for  enforcing  them 
has  been  agreed  upon.  Mr.  Howard  believes  that 
"this  whole  matter  can  be  adjusted  fairly  only  on  an 
honest  and  simple  basis,  namely :  the  delivery  of  an 
exact  amount  of  work  for  an  exact  amount  of  wages." 
Provision  could  theoretically  be  made  for  such  an  ar- 
rangement under  the  differential  week-rate  system, 
which  would  have  neither  the  irritating  and  fictitious 
exactness  of  the  bonus  system  nor  the  laxity  of  the 
time  system.  Under  the  latter  system,  the  company 
feels  that  while  the  consideration  moving  to  the  work- 
ers, their  wage,  is  fixed  exactly  by  the  terms  of  the 
agreement,  the  consideration  moving  from  them,  their 
work,  is  not  clearly  settled. 

Thus  far,  the  committee  working  on  the  problem 
has  been  unable  to  reach  a  satisfactory  conclusion.  It 
has  made  no  report,  and  the  Board  of  Arbitration  can 
decide  the  matter  only  on  the  presentation  of  a  report. 
The  Board  has  ruled,  however,  that  the  problem  of 

*  September  I,   1920. 


2i6  INDUSTRIAL  GOVERNMENT 

standardization  is  a  separate  problem  from  that  of  en- 
forcement. 

The  objections  of  union  labor  to  piece  work  are 
based  on  the  fear  of  speeding  up,  and  its  effects  on 
health,  earnings,  and  rate-cutting.  These  objections 
have  been  overcome  in  the  piece-work  departments  at 
the  Hart,  Schaffner  &  Marx  factories  by  the  institu- 
tion of  a  third  commission  designed  to  give  each  side 
a  voice  in  the  setting  of  piece  rates. 

"Responsibility  for  making  piece  work  rates  is  lodged 
primarily  in  the  Trade  Board.  For  expediency,  the  re- 
sponsibility, however,  has  been  turned  over  by  the  Trade 
Board  to  a  committee,  known  as  the  Rate  Committee,  and 
composed  of  three  members,  one  representing  the  company, 
one  representing  the  people,  and  the  chairman  of  the  Trade 
Board.  As  a  matter  of  practice,  the  work  of  rate  making 
is  carried  on  almost  exclusively  by  the  two  members  repre- 
senting the  company  and  the  people.  While  some  cases 
are  brought  before  the  full  committee,  these  cases  are  ex- 
ceptional when  compared  to  the  number  settled  by  the  two 
members. 

"The  agreement  provides  that  in  fixing  rates  the  Board 
is  restricted  to  the  following  rules:  Changed  prices  must 
correspond  to  the  changed  work  and  new  prices  must  be 
based  on  the  old  prices  where  possible. 

"Whenever  a  question  of  piece  work  rate  arises,  it  is 
taken  up  in  the  first  instance  by  the  two  members  of  the 
committee  and  an  attempt  is  made  to  reach  an  agreement. 
If  an  agreement  is  reached,  a  specification  of  the  work  to 
be  performed  and  the  rate  to  be  paid  is  prepared  and  signed 
by  both  representatives  without  any  further  action.  If, 
however,  the  two  parties  are  unable  to  reach  an  agreement, 
the  case  is  taken  up  with  the  full  committee  and  an  agree- 
men  reached,  or  a  decision  made  fixing  the  rate  and  speci- 
fications. If  this  decision  is  unsatisfactory  to  either  party, 
the  decision  may  be  appealed  to  the  Board  of  Arbitration. 


DUE  PROCESS  OF  LAW  217 

"New  rates  are  always  provisional  and  temporary  and  are 
subject  to  review  after  sufficient  period  of  trial  to  de- 
termine their  merit.  The  Committee  seeks  to  make  the 
temporary  rate  as  nearly  equitable  as  possible,  both  for  its 
effect  on  the  people  and  to  save  a  repetition  of  the  negotia- 
tion. 

"After  the  specification  and  rate  have  been  authorized 
by  the  Rate  Committee,  there  can  be  no  alteration  of  the 
terms  either  by  the  company  or  the  people  without  per- 
mission from  the  Rate  Committee." 

The  agreement  further  provides  that,  "In  the  event 
a  piece  worker  is  required  to  change  his  mode  of  op- 
eration so  that  it  causes  him  to  lose  time  in  learning, 
his  case  may  be  brought  to  the  Rate  Committee  for 
its  disposition." 

The  loss  of  time  resulting  from  v^aiting  for  work 
has  developed  considerable  friction  in  connection  with 
the  piece-work  system.  Thus  far  the  only  attempt 
to  deal  with  the  problem  is  contained  in  a  sentence  of 
the  agreement  providing  for  cooperation  between  depu- 
ties and  company  in  the  attempt  to  abolish  waiting. 
The  Board  of  Arbitration  has  refused  to  sanction 
the  adoption  of  any  scheme  of  paying  for  waiting 
"until  a  plan  is  devised  that  will  eliminate  the  dangers 
and  safeguard  against  its  possible  abuses." 

The  problem  of  holding  work  for  inspection  has 
arisen  in  connection  with  the  effect  of  piece  rates  on 
quality.  Quality  foremen  in  the  shops  may  complain 
of  a  man's  work.  The  question  then  arises  as  to  how 
many  pieces  the  worker  may  hold  to  confute  the  claims 
of  the  quality  man.     The  rule  now  reads : 

"That  the  shop  chairmen  must  take  the  responsibility  of 
deciding  whether  more  than  one  garment  is  needed  for 
representation.     As  a  check  upon  abuse  of  this  responsi- 


2i8  INDUSTRIAL  GOVERNMENT 

bility,  it  (the  Board  of  Arbitration)  suggests  that  if  any 
superintendent  has  reason  to  believe  that  a  shop  chairman 
is  either  incompetent  to  judge  whether  several  garments 
are  needed  for  the  investigation  or  is  wilfully  aiding  in 
holding  work  beyond  what  is  necessary,  he  may  file  com- 
plaint against  such  chairman  with  the  Trade  Board.  In 
such  a  case  the  records  of  the  work  held  for  investigation 
by  the  chairman  for  a  period  of  time  may  properly  be 
considered." 

The  problem  of  union  opposition  to  the  introduction 
of  labor-saving  machinery  and  improved  methods  has 
occupied  the  courts  in  several  cases.  The  rule  laid 
down  is  that  protests  of  the  union  will  not  avail  to 
prevent  the  introduction  of  improved  production  meth- 
ods, and  that  the  company  is  at  liberty  to  make  any 
improvements  it  sees  fit.  This  right  of  the  company 
is  subject  to  three  limitations.  In  the  first  place,  men 
employed  under  the  new  conditions  are  not  to  have 
their  wages  reduced.  This  principle  was  developed 
by  the  Board  of  Arbitration  from  the  provision  in  the 
agreement  that  "change  of  prices  must  correspond  to 
the  change  of  work  and  new  prices  must  be  based  on 
old  prices  where  possible."  In  the  second  place,  as  a 
matter  of  practice  the  company  is  expected  to  provide 
work  for  any  men  whose  jobs  are  eliminated  through 
improvements,  at  as  nearly  the  old  rates  and  conditions 
as  possible.  In  the  third  place,  the  cooperation  and 
approval  of  union  deputies  is  to  be  secured  before 
changes  are  introduced.     Mr.  Williams*  opinion  was: 

"Whenever  a  change  needs  to  be  introduced  which  is 
likely  to  give  rise  to  objection  or  dispute,  the  foreman 
should  take  steps  to  have  it  authorized  by  the  representative 
of  the  workers,  who  should  at  the  same  time  see  that  their 
interests  in  the  matter  are  safeguarded.     The  union  mem- 


DUE  PROCESS  OF  LAW  219 

ber  of  the  price  committee  should  be  notified  and  he  should 
attend  the  call  as  promptly  as  practicable.  After  hearing 
the  nature  of  the  change  proposed,  he  should,  if  consistent 
with  justice  and  the  just  claims  of  the  worker,  direct  the 
section  to  proceed  with  the  work  pending  the  formal  dis- 
position of  the  matter  by  the  price  committee." 

In  accordance  with  these  principles,  it  was  held  in 
one  case  that  the  introduction  of  vest-pressing  ma- 
chines did  not  involve  the  creation  of  a  new  trade, 
but  constituted  simply  the  introduction  of  new  meth- 
ods in  an  old  trade,  and  so  should  be  followed  by  no 
changes  in  earnings  resulting  from  revised  piece  rates. 
In  another  case  the  union  protested  against  the  action 
of  the  company  in  giving  knife  sharpening  in  the  cut- 
ting rooms  to  one  man.  The  protest  was  based  on 
the  claim  that  such  action  would  deprive  the  men  of 
skill  in  an  operation  which  they  might  have  to  perform 
in  other  shops.  The  Board  of  Arbitration  allowed  the 
union's  claim,  evidently  recognizing  that  the  opportu- 
nity of  one  party  to  a  contract  to  perform  his  part  of 
the  contract  may  be  regarded  as  a  condition  of  the 
obligation.^ 

With  regard  to  apprenticeship,  a  definite  ratio  has 
been  established  for  the  cutting  room  (10  per  cent  of 
the  permanent  cutters  may  be  apprentices)  ;  and  in  case 
of  any  large  increase  of  apprentices,  the  matter  may 
be  brought  by  the  union  deputies  before  the  Board 
of  Arbitration.  The  Board  has  hesitated  to  restrict 
the  right  of  the  company  to  increase  its  force  at  will. 
The  union,  on  the  other  hand,  hopes  to  reduce  the  evils 

*Cf.  Turner  v.  Sawdon  &  Co.  [1901]  2  Kings  Bench,  653; 
.Cooper  V.  Stronge  &  Warner  Co.,  in  Minn.  177. 


220  INDUSTRIAL  GOVERNMENT 

attendant  on  temporary  increases  of  force  by  its  pro- 
jected scheme  of  unemployment  insurance.^ 

Another  set  of  cases  involving  interpretation  of  the 
wage  contract  has  to  do  with  the  equal  distribution  of 
work  and  the  equalization  of  earnings.  This  requires 
equal  treatment  for  all  in  the  division  of  overtime  and 
lay-off.  Thus,  in  one  case^  "The  cutters  and  trim- 
mers complain  that  insufficient  notice  is  given  when 
overtime  is  required  to  be  worked,  and  that  it  results 
in  giving  an  undue  share  of  the  overtime  work  to  those 
who  do  not  need  to  make  prearrangement  at  home. 
The  company  states  that  the  need  for  overtime  is 
often  not  known  until  late  in  the  day  and  it  is  not  al- 
ways possible  to  foresee  the  exigency.  In  view  of  this 
situation,  the  chairman  [of  the  Board  of  Arbitration] 
will  not  issue  any  rule,  but  will  recommend  to  those 
in  charge  of  issuing  orders  for  overtime  that  they 
keep  the  need  of  the  men  in  mind,  and  that  they  make 
every  reasonable  effort  to  inform  them  of  expected 
overtime  as  far  in  advance  as  possible,  so  that  the 
matters  complained  of  may  be  avoided." 

With  regard  to  the  equalization  of  lay-offs,  the  rule 
is  as  follows :  "No  union  member  who  is  a  permanent 
worker  shall  be  laid  off  in  the  tailor  shops  except  for 
cause,  whether  in  the  slack  or  busy  season,  except  as 
provided  herein.  .  .  .  During  the  slack  season  the 
work  shall  be  divided  as  near  as  is  practicable  among 
all  hands."  Thus,  in  one  case  in  which  a  system  of 
two-day  rotation  had  been  devised  to  keep  all  union 
hands  at  work  during  a  slack  period,  the  union  objected 
to  the  arrangement  on  the  ground  that  some  days  were 

*  See  Hillman  and  the  Amalgamated.  William  Hard,  23  New 
Republic  15  (June  2,  1920). 


DUE  PROCESS  OF  LAW  221 

better  for  work  than  others.  Mr.  Williams  accord- 
ingly ruled  that  the  company  should  institute  a  scheme 
to  allow  all  the  men  who  came  to  the  shops  in  the 
morning  to  have  the  day's  work  divided  among  them. 
A  two  weeks'  notice  before  any  lay-offs  are  made  must 
be  given  by  the  company  to  the  workers  in  question. 

In  the  same  connection  the  following  rule  was  laid 
down  by  Mr.  Williams. 

"This  is  an  appeal  from  a  Trade  Board  decision  which 
raised  the  question  of  whether  a  foreman  may,  during  the 
slack  season,  perform  labor  that  would  otherwise  be  per- 
formed by  union  workers. 

"The  chairman  feels  that  to  permit  the  foreman  to  take 
the  work  which  the  workers  feel  they  are  entitled  to  under 
the  agreement  will  cause  more  dissatisfaction  than  would 
be  compensated  by  the  saving. 

"He  recommends,  however,  that  the  union  be  not  tech- 
nical in  its  objection  to  the  foreman  performing  such  labors 
as  do  not  run  counter  to  union  interests  in  a  tangible  way, 
and  that  they  be  encouraged  to  be  useful  in  such  ways  as 
may  be  possible  without  raising  greater  difficulties  than 
can  be   compensated." 

The  rule  with  regard  to  "overcrowding"  in  a  section, 
consequent  on  seasonal  fluctuations,  is  thus  stated  in 
the  agreement: 

"Overcrowding  of  sections  is  important  in  this  agree- 
ment as  the  point  at  which  the  provision  for  the  preference 
becomes  operative.  It  is  agreed  that  when  there  are  too 
many  workers  in  a  section  to  permit  of  reasonably  steady 
employment,  a  complaint  may  be  lodged  by  the  union,  and 
if  proved,  the  non-union  members  of  the  section,  or  as 
many  of  them  as  may  be  required  to  give  the  needed  re- 
lief, shall  be  dismissed." 


222  INDUSTRIAL  GOVERNMENT 

Increases  in  force  are  commonly  made  by  the  com- 
pany with  the  consent  of  the  union,  but  this  is  a  mat- 
ter of  choice  with  the  company  which  is  governed 
only  by  its  own  interests  in  following  the  rule.  Thus 
a  decision  of  Mr.  Williams'  of  March,  191 8,  gave  the 
company  the  right  to  add  not  more  than  twelve  cutters 
to  the  permanent  force.  It  was  said  that  there  was 
no  provision  in  the  agreement  requiring  the  consent 
of  the  cutters  to  the  making  of  additions;  and  that, 
while  cooperation  in  this  matter  had  proved  valuable 
in  reducing  friction  over  a  delicate  matter,  the  small- 
ness  of  the  claim  in  question  and  the  absence  of  any 
constitutional  right  on  the  part  of  the  union  made  the 
arbitrator  unwilling  to  abridge  the  rights  of  the  com- 
pany. He  said,  however,  that  "the  successful  working 
of  the  agreement  has  been  aided  by  joint  selection." 

As  has  been  pointed  out,  the  Amalgamated  Cloth- 
ing Workers  of  America  expect  to  do  away  with  this 
problem  of  irregular  employment  and  reduced  earn- 
ings by  the  maintenance  of  an  unemployment  insur- 
ance fund  for  the  benefit  of  its  members.  The  scheme 
has  been  advocated  in  the  union  for  some  time,  and 
was  approved  at  their  last  convention.  A  possible 
method  of  securing  this  fund  would  be  by  forcing  the 
employers  to  contribute  amounts  proportionate  to  their 
respective  turnover  figures.  The  effect  would  be  to 
lay  a  discouraging  tax  on  irregularity  of  operation  and 
employment,  and  to  provide  benefits  for  those  to  whom 
such  irregularity  of  employment  as  remains  is  a  men- 
ace. The  matter,  however,  will  probably  be  managed 
by  the  union  alone.  An  increase  in  wages  will  be 
asked  for  to  enable  its  members  to  support  the  fund. 

Shop  safety  and  sanitation  are  evidently  sufBciently 


DUE  PROCESS  OF  LAW  223 

provided  for  by  the  labor  department  and  the  Illinois 
Compensation  Law,  as  no  controversies  on  these  sub- 
jects have  been  reported  since  the  early  days  of  the 
agreement.  An  interesting  ruling  on  general  condi- 
tions of  work  was  made  in  February  of  1920  by  the 
Board  of  Arbitration.  The  Board  then  ruled  that  the 
sending  out  of  work  to  be  finished  at  home,  practiced 
on  a  very  small  scale  in  some  of  the  shops,  should  be 
discontinued  as  soon  as  possible.  The  Board  com- 
mented on  the  danger  to  standards  involved  in  such 
a  policy,  and  appointed  a  joint  committee  to  determine 
how  soon  the  award  could  be  carried  out.  The  prac- 
tice is  now  discontinued. 

The  hours  of  work  in  the  men's  clothing  industry 
are  forty-four  a  week.  Fifteen  dollars  a  week  is  the 
minimum  wage  for  apprentices ;  $16  for  apprentice  cut- 
ters. The  minimum  for  journeymen  cutters  is  $43  a 
week.  Time  and  a  half  for  overtime  is  given  week- 
workers  and  fifty  per  cent  extra  for  overtime  is  allowed 
to  those  on  piece  work.  On  this  basis,  a  series  of  dif- 
ferential rates  for  different  classes  of  work  has  been 
constructed.  The  scales  are  the  result  of  negotiations 
in  the  various  departments,  cutting,  trimming,  vest- 
making,  tailoring,  off-pressing,  inspecting.  Mr.  Wil- 
liams said  in  one  case: 

"There  seems  to  be  no  uniform  rule  by  which  the  wages 
of  week-workers  are  fixed.  The  more  common  ground  for 
basing  week  wages  appears  to  be  efficiency  and  length  of 
service,  and  the  lack  of  uniformity  is  naturally  due  to  the 
^variation  in  those  factors.  The  practice  is  to  deal  with 
week  wages  as  related  to  individual  workers. 

'The  spirit  of  the  agreement,  however,  is  to  maintain 
wages  wherever  equivalence  of  service  is  maintained,  and 
it  does  not  contemplate  a  reduction  of  earnings  unless  effort 


224  INDUSTRIAL  GOVERNMENT 

is  correspondingly  reduced.  If,  therefore,  an  individual 
week-worker  is  reduced,  it  is  up  to  the  company  to  show 
some  cause  why  the  reduction  is  made." 

The  union  has  accepted  this  system  of  difTerential 
rates,  opposed  apparently  to  all  union  traditions,  be- 
cause of  the  confidence  it  has  in  the  justice  of  the  labor 
policy  of  the  company,  and  its  support  by  the  system 
of  commissions  and  courts  to  which  its  members  may 
appeal.  A  fourth  commission,  appointed  on  Decem- 
ber 22,  191 9,  has  worked  out  a  new  classification  of 
week-workers. 

This  appointment  was  made  in  a  decision  rendered 
by  Mr.  Tufts  which  explains  and  illustrates  perhaps 
better  than  any  other  decision  the  spirit  of  this  indus- 
trial government  and  the  considerations  which  influence 
its  officials  in  dealing  with  its  problems.  Wage  deter- 
minations have  commonly  been  left  to  the  triennial 
conferences  of  union  and  company  representatives 
which  draw  up  the  labor  agreements.  The  Trade 
Board  and  Board  of  Arbitration  are  ordinarily  called 
upon  only  to  interpret  these  agreements  and  apply  their 
terms  to  individual  cases.  Examples  of  such  inter- 
pretations have  been  given  in  other  connections. 
There  is,  however,  a  clause  in  the  agreement  under 
which  the  Board  of  Arbitration  may  be  required  to 
perform  the  function  of  determining  wage  scales.  The 
provision  reads  as  follows:  "If  there  shall  be  a  gen- 
eral change  in  wages  or  hours  in  the  clothing  indus- 
try, which  shall  be  sufficiently  permanent  to  warrant 
the  belief  that  the  change  is  not  temporary,  then  the 
Board  shall  have  power  to  determine  whether  such 
change  is  of  so  extraordinary  a  nature  as  to  justify 


DUE  PROCESS  OF  LAW  225 

a  consideration  of  the  question  of  making  a  change 
in  the  present  agreement,  and,  if  so,  then  the  Board 
shall  have  power  to  make  such  changes  in  wages  or 
hours  as  in  its  judgment  shall  be  proper."  Four  wage 
adjustments  had  been  made  at  various  times  under 
this  provision.  On  December  9,  1919,  an  appeal  for 
a  fifth  application  was  made,  and  in  granting  this  ap- 
peal, Mr.  Tufts  wrote  the  decision  in  question. 

It  is  in  the  field  of  legislative  arbitration  to  which 
this  decision  belongs  that  conspicuous  examples  of 
government  regulation  are  to  be  found,  and  that  regu- 
lative principles  are  particularly  scarce  and  desirable. 
Mr.  Wilson  Compton,  in  the  American  Economic  Re- 
znew,^  pointed  out  that  the  Australasian  arbitration 
boards  have  given  predominant  weight  to  considera- 
tions of  the  standard  of  life  of  the  workers  concerned 
and  of  what  wages  the  industry  will  bear.  They  have 
also  shown  a  disposition  to  make  deductions,  on  gen- 
eral principles,  from  the  claims  of  each  party,  and  they 
have  recognized  that  the  wages  which  they  set  must  be 
regarded  as  a  standard,  below  which  sub-standard 
workers  must  be  allowed  to  fall.  Two  additional  con- 
siderations have  been  introduced  by  Mr.  Tufts  in  the 
disposal  of  the  case  under  discussion.  Granting  at 
the  same  time  that  wage  increases  in  the  factories  have 
kept  up  with  the  cost  of  living,  and  that  the  company 
can  afford  an  increase,  the  arbitrator  makes  the  rea- 
sonableness of  the  increase  for  which  he  provides  turn 
on  the  bargaining  power  of  clothing  workers  and  the 
fact  that  the  increase  will  not  be  passed  on  to  the  pub- 
lic to  any  serious  extent.  The  introduction  of  the  lat- 
ter consideration  into  the  discussion  is  important  in 

*  "Wage  Theories  in  Industrial  Arbitration,"  Vol.  VI,  p.  324. 


226  INDUSTRIAL  GOVERNMENT 

view  of  the  accusation  of  profiteering  which  has  been 
directed  against  the  combination  of  Hart,  Schaffner  & 
Marx  and  the  Amalgamated  Clothing  Workers  of 
America. 

In  discussing  the  question  of  bargaining  power  Mr. 
Tufts  said: 

"The  general  question  as  to  the  propriety  of  any  in- 
crease turns  therefore  on  this:  Shall  a  group  of  workers 
be  permitted  under  this  agreement  to  avail  itself  of  market 
conditions  of  supply  and  demand  to  improve  its  standard 
of  living  beyond  the  general  level  of  advancing  rates  in 
cost  of  living,  or  is  it  the  duty  of  this  Board  to  refuse  such 
a  demand  on  the  grounds  of  public  policy? 

"In  answering  this  question,  the  Board  believes  that  it 
must  be  governed  largely,  although  not  exclusively,  by  the 
prevailing  principles  and  policies  of  the  country  as  em- 
bodied in  its  institutions.  In  endeavoring  to  give  a  just 
decision,  the  Board  does  not  feel  warranted  in  setting  up 
a  standard  too  widely  at  variance  with  our  present  social 
and  economic  order. 

"The  principles  and  policies  of  the  United  States  are,  with 
certain  qualifications,  those  of  individualism,  or  the  com- 
petitive system.  This  means  that  prices,  wages,  and  profits 
are  fixed  by  bargaining  under  the  forces  of  supply  and 
demand.  This  general  principle  is  qualified  and  limited  in 
the  case  of  'property  affected  with  a  public  interest,'  such 
as  railways.  In  private,  as  distinguished  from  public  or 
semi-public  business  and  industry,  there  is  a  moral  disap- 
proval on  the  one  hand  for  such  extremely  low  wages  as 
make  a  decent  standard  of  living  impossible,  and  on  the 
other  hand,  for  extreme  increases  in  the  prices  of  neces- 
saries of  life,  but  there  is  no  general  disapproval  of  the 
general  principle  of  profiting  by  market  conditions.  In 
time  of  national  emergency,  we  used  the  word  'profiteer' 
to  condemn  taking  advantage  of  the  country's  need  for  an 
unreasonable  private  gain.  But  in  ordinary  time,  there  is 
as  yet  no  recognized  standard  for  the  fairness  of  prices  of 


DUE  PROCESS  OF  LAW  227 

various  goods,  or  for  relative  vi'ages  in  different  industries, 
other  than  what  the  bargainers  agree  upon.  This  method 
may  often  fail  to  give  justice  as  measured  by  various  other 
standards  of  merit  or  desert.  But  for  the  most  part,  labor 
has  had  to  bargain  for  its  wages,  and  it  cannot  be  expected 
to  forego  entirely  the  advantages  which  market  conditions 
now  afford. 

"Coming  then  to  the  specific  concrete  situation  which 
confronts  us,  we  have  the  outstanding  fact  that  very  substan- 
tial increases  to  clothing  workers  have  been  granted  in 
all  the  other  principal  markets  in  this  country  and  Canada, 
and  in  many  less  important  centers.  These  increases  have 
usually  been  five  or  six  dollars  a  week;  in  some  cases,  they 
have  been  more.  In  these  days  when  both  employers  and 
workers  know  of  such  increases  and  plan  accordingly,  it  is 
not  practicable  to  treat  the  Chicago  market  as  an  entirely 
distinct  situation  to  be  judged  on  its  own  merits,  without 
reference  to  what  is  going  on  elsewhere  in  the  country." 

Thus  far,  considerations  of  social  welfare  have  been 
replaced  by  those  of  economic  struggle.  There  fol- 
lov^s  an  extension  of  the  field  of  inquiry  with  regard 
to  public  purpose,  and  the  fourth  consideration  (if  the 
first  three  be  included  under  the  questions  of  standard 
of  life,  resources  of  the  industry,  and  bargaining 
power)  is  introduced. 

In  this  connection  four  points  are  made.  First,  if 
the  public  interest  in  low  prices  is  to  be  invoked  to 
keep  down  wages,  a  similar  justification  would  require 
a  similar  regulation  of  profits  and  efficiency  in  produc- 
tion. The  argument  is  not  carried  to  its  final  con- 
clusion :  that  the  failure  of  the  public  to  exercise  such 
regulation  is  exactly  one  of  the  factors  which  makes 
higher  wages  necessary.  The  arbitrator  has  already 
recognized  that  wages  have  increased  with  the  cost  of 
living,  and  carrying  the  argument  to  its  conclusion 


228  INDUSTRIAL  GOVERNMENT 

would  not  advance  his  case.  He  leaves  it,  therefore, 
in  the  rather  inconclusive  state  where  the  failure  of 
society  to  do  one  desirable  thing  is  taken  to  justify  or 
require  its  failure  to  do  another  thing  which  is  not 
shown  to  be  in  itself  less  desirable. 

In  the  second  place,  Mr.  Tufts  makes  the  point, 
which  is  one  primarily  of  standard  of  living,  that  in 
seasonal  or  periodically  fluctuating  industries  high 
wages  and  profits  ought  to  be  permitted  at  the  peak 
of  production  to  compensate  for  losses  from  unemploy- 
ment and  idleness  which  are  to  follow. 

The  third  point  is  the  really  significant  one  in  this 
connection. 

"Undoubtedly  there  is  a  limit,  even  if  there  is  no  scien- 
tific method  for  setting  it,  to  what  even  individualism  will 
or  ought  to  approve.  Prices  of  clothing  have  advanced  and 
are  certain  to  be  further  advanced  whatever  may  be  the 
decision  of  this  case.  In  fact,  retailers  had  to  place  orders 
for  their  light-weight  clothing  before  this  case  was  heard 
and  inasmuch  as  general  increases  were  asked  for  in 
September  and  granted  in  other  markets  in  November,  it 
may  be  presumed  that  such  possibilities  were  in  mind  when 
prices  were  set  for  the  light-weight  consumer.  The  Board 
has  carefully  considered  the  effect  to  the  consumer  of  the 
increase  asked  for.  The  fact  is  that  making  of  clothes 
under  modern  methods  has  come  to  be  an  efficient  process, 
A  part  of  the  increase  in  earnings  which  have  come  about 
in  the  industry  has  been  accompanied  by  improvement  in 
production.  Thus  part  of  the  increased  earnings,  shown 
particularly  in  piece-work  production,  does  not  necessarily 
involve  any  increase  in  cost  of  clothing  to  the  public.  The 
increase  involved  in  this  award  means  a  relatively  small 
increase  in  the  cost  of  clothing." 

The  fourth  consideration  of  general  public  impor- 
tance used  to  justify  the  award  is  the  consideration  of 


DUE  PROCESS  OF  LAW  229 

the  interest  of  the  public  in  "continuous  production 
and  a  peaceful  and  orderly  method  of  conducting  in- 
dustry." The  assumption  underlying  the  discussion 
of  this  point  is  that  any  failure  to  grant  an  increase 
would  endanger  the  peace  and  order  of  the  industry. 
The  discussion  has  returned  to  the  force  of  bargaining 
power,  which  is,  after  all,  the  motivating  force  of  the 
decision. 


THE  POWER   OF  THE   WORKERS 

It  should  be  clear  from  the  preceding  discussion  that 
the  possession  of  this  bargaining  power  on  the  part  of 
the  workers  has  been  of  paramount  importance  in  the 
development  of  industrial  law.  It  must  indeed  be  con- 
ceded that  labor  leaders,  members  of  the  business,  and 
arbitrators  have  been  very  largely  animated  by  ideals 
of  public  welfare  in  working  for  security  and  im- 
proved standards  of  living  for  the  workers.  But  the 
manner  in  which  these  ideals  have  been  put  into  prac- 
tice has  been  as  much  dependent  on  the  relative  eco- 
nomic strength  of  the  parties,  as  was  the  form  of 
Magna  Charta  on  the  strength  of  the  barons,  or  that 
of  the  Petition  of  Right  on  the  strength  of  the  bour- 
geoisie of  England. 

It  has  been  indicated  sufficiently  that  in  the  fields 
over  which  the  government  of  Hart,  Schaffner  &  Marx 
exercise  control,  the  workers  are  assured  of  possessing 
equal  power  with  the  management.  Their  representa- 
tives are  equal  in  each  case  to  those  of  the  management 
and  they  share  in  paying  the  impartial  judges  who 
administer  the  law.  It  may  also  have  appeared  that 
the  workers  have  some  advantage  from  the  strength 


230  INDUSTRIAL  GOVERNMENT 

which  their  organization  gives  them,  in  securing  fa- 
vorable awards.  This  may  well  be  a  permanent  aspect 
of  this  industrial  government,  inasmuch  as  an  element 
of  its  "public  policy"  must  always  be  the  keeping  of 
peace. 

On  the  other  hand  the  field  over  which  this  judicial 
government  exercises  its  jurisdiction  is  a  narrow  one. 
The  courts  are  confined  to  the  interpretation  of  the 
agreement  as  to  wages,  hours,  and  conditions  of  work, 
and  the  maintenance  of  discipline.  The  only  direction 
in  which  the  workers  show  signs  of  extending  their 
power  and  interests  is  that  of  technical  production. 
They  are  not  interested,  as  yet,  in  the  financial,  sales, 
or  purchasing  aspects  of  the  business,  and  they  make 
no  demands  for  profit  sharing  or  other  welfare  poli- 
cies. 

An  account  has  already  been  given  of  ihe  agreements 
which  have  been  reached  and  the  poUcies  which  have 
been  mapped  out  with  regard  to  the  questions  of  pro- 
duction in  which  the  workers  are  interested.  The 
union  has  been  quite  as  conscious  as  the  company  of 
the  importance  of  reaching  compromises  which  would 
in  no  way  cripple  the  latter,  on  the  problem  of  regula- 
tion of  output  and  the  introduction  of  new  machinery. 
The  action  of  the  national  convention  in  the  recent 
meeting  at  Boston  in  favoring  the  scientific  develop- 
ment of  standards  of  work  and  wages  is  a  sufficient 
indication  of  the  quality  of  statesmanship  represented 
by  the  leaders  of  the  Amalgamated  Clothing  Workers 
of  America.  They  recognize  clearly  that  order  and 
production  in  their  industry  are  necessary  conditions 
of  the  general  as  well  as  of  their  own  prosperity. 

The  account  of  the  law  relating  to  a  legislative  as- 


DUE  PROCESS  OF  LAW  231 

sembly  of  union  and  company  representatives,  meeting 
every  three  years;  an  executive  department  composed 
of  labor,  production,  and  quality  executives  of  the 
company ;  a  judicial  system  of  courts  and  commissions, 
representing  union  and  company;  an  account  of  the 
way  in  which  the  law,  with  respect  to  these  agencies,  has 
developed,  to  secure  the  cooperation  of  workers  and 
the  owners  of  capital  in  turning  out  clothes,  would  be 
incomplete  without  the  quotation  of  statements  of  pur- 
poses and  ideals  which  have  inspired  some  of  the  pio- 
neers of  industrial  law  who  have  worked  at  this  prob- 
lem in  these  shops.  These  statements  will  help  to 
clarify  the  conception  of  the  proper  relation  between 
company  and  workers  which  has  governed  the  devel- 
opment of  the  Hart,  Schafifner  &  Marx  constitution. 
Professor  Howard's  statement  of  principles  is  as 
follows : 

"Industrial  peace  will  never  come  so  long  as  either  em- 
ployer or  employee  believe  that  they  are  deprived  of  rights 
honestly  belonging  to  them.  Our  experience  has  taught 
that  the  business  man  in  authority  is  a  trustee  of  various 
interests,  including  his  own,  and  if  he  administers  his  busi- 
ness so  as  to  conserve  and  harmonize  these  interests  to 
the  best  of  his  ability,  he  is  most  likely  building  an  endur- 
ing success. 

"Arbitration  and  conciliation  should  be  applied  to  all  de- 
partments of  a  business  wherever  there  is  a  conflict  of 
interest.  If  nothing  more,  it  insures  exhaustive  discussion 
of  every  matter  of  importance,  gives  everybody  an  oppor- 
tunity to  express  his  opinions,  frequently  brings  to  light 
valuable  suggestions,  and  makes  possible  a  higher  degree 
of  cooperation  and  team-work.  It  is  a  method  to  be  em- 
ployed continuously  to  secure  harmony  and  satisfaction. 
Patience  and  self-control  are  essential  in  administering  a 
business  on  this  basis.    It  is  human  nature  to  resent  inter- 


232  INDUSTRIAL  GOVERNMENT 

ference  and  to  desire  unrestricted  liberty  of  action,  but 
these  conditions  are  not  necessary  and  are  often  inimical  to 
true  success.  Few  men  can  use  unlimited  power  wisely  and 
no  wise  man  will  dispense  with  checks  which  tend  to  keep 
him  in  the  right  path;  certainly,  he  will  approve  of  checks 
calculated  to  restrain  his  agents  from  arbitrary  and  un- 
just acts  toward  fellow  employees. 

"If  the  employer  voluntarily  limits  his  own  authority 
and  agrees  to  conduct  his  business  according  to  the  rule 
of  reason  and  even-handed  justice  as  interpreted  by  an  out- 
side authority,  such  as  an  arbitration  board,  he  must  insist 
that  the  organized  employees  submit  to  the  same  limita- 
tion, otherwise  his  sacrifice  will  be  futile  and  his  submission 
to  injustice  cowardly. 

"Unions  should  be  recognized  and  favored  in  the  same 
proportion  as  they  manifest  a  genuine  desire  to  govern 
themselves  efficiently.  All  agreements  should  be  so  drawn 
as  to  release  the  employer  from  his  obligations  whenever 
the  unions  fail  to  observe  theirs.  Arbitration  boards,  offi- 
cials in  charge  of  labor  matters,  and  union  leaders  shoula 
direct  their  operations  and  make  their  decisions  with  the 
one  purpose  always  in  mind,  namely,  to  make  it  profitable 
and  easy  for  all  parties  to  acquiesce  in  the  rule  of  reason 
and  justice,  and  dangerous  and  difficult  for  them  to  attempt 
to  get  unjust  advantage. 

"We  regard  it  as  an  essential  element  in  maintaining 
industrial  peace  to  centralize  the  administration  of  discipline 
in  one  official  having  no  interest  except  to  maintain  the 
efficiency  of  the  shops  without  disturbing  the  harmony  and 
good-will  of  the  people." 

Mr.  Williams'  famous  preamble  to  the  agreement 
may  conclude  this  phase  of  the  discussion. 

"On  the  part  of  the  employer  it  is  the  intention  and  ex- 
pectation that  this  compact  of  peace  will  result  in  the 
establishment  and  maintenance  of  a  high  order  of  discipline 
and  efficiency  by  the  willing  cooperation  of  union  and 
workers  rather  than  by  the  old  method  of  surveillance  and 


DUE  PROCESS  OF  LAW  233 

coercion;  that  by  the  exercise  of  this  discipline  all  stop- 
pages and  interruptions  of  work,  and  all  wilful  violations 
of  rules  will  cease ;  that  good  standards  of  workmanship 
and  conduct  will  be  maintained  and  a  proper  quantity, 
quality  and  cost  of  production  will  be  assured;  and  that 
out  of  its  operation  will  issue  such  cooperation  and  good- 
will between  employers,  foremen,  union  and  workers  as 
will  prevent  misunderstanding  and  friction  and  make  for 
good  team  work,  good  business,  mutual  advantage  and 
mutual  respect. 

"On  the  part  of  the  union  it  is  the  intention  and  ex- 
pectation that  this  compact  will,  with  the  cooperation  of 
the  employer,  operate  in  such  a  way  as  to  maintain, 
strengthen,  and  solidify  its  organization,  so  that  it  may  be 
made  strong  enough,  and  efficient  enough,  to  cooperate  as 
contemplated  in  the  preceding  paragraph;  and  also  that  it 
may  be  strong  enough  to  command  the  respect  of  the  em- 
ployer without  being  forced  to  resort  to  militant  or  un- 
friendly measures. 

"On  the  part  of  the  workers  it  is  the  intention  and  ex- 
pectation that  they  pass  from  the  status  of  wage  servants, 
with  no  claim  on  the  employer  save  his  economic  need,  to 
that  of  self-respecting  parties  to  an  agreement  which  they 
have  had  an  equal  part  with  him  in  making;  that  this 
status  gives  them  an  assurance  of  fair  and  just  treatment 
and  protects  them  against  injustice  or  oppression  of  those 
who  may  have  been  placed  in  authority  over  them;  that 
they  will  have  recourse  to  a  court,  in  the  creation  of  which 
their  votes  were  equally  potent  with  that  of  the  employer, 
in  which  all  their  grievances  may  be  heard,  and  all  their 
claims  adjudicated;  that  all  changes  during  the  life  of  the 
pact  shall  be  subject  to  the  approval  of  an  impartial  tribunal, 
and  that  wages  and  working  conditions  shall  not  fall  below 
the  level  provided  for  in  the  agreement. 

"The  parties  to  this  pact  realize  that  the  interests  sought 
to  be  reconciled  herein  will  tend  to  pull  apart,  but  they 
enter  it  in  the  faith  that  by  the  exercise  of  the  cooperative 
and  constructive  spirit  it  will  be  possible  to  bring  and  keep 
them  together.     This  will  involve  as  an  indispensable  pre- 


234  INDUSTRIAL  GOVERNMENT 

requisite  the  total  suppression  of  the  militant  spirit  by  both 
parties  and  the  development  of  reason  instead  of  force  as 
the  rule  of  action.  It  will  require  also  mutual  consideration 
and  concession,  a  willingness  on  the  part  of  each  party  to 
regard  and  serve  the  interests  of  the  other,  so  far  as  it  can 
be  done  without  too  great  a  sacrifice  of  principle  or  in- 
terest. With  this  attitude  assured  it  is  believed  no  differ- 
ences can  arise  which  the  joint  tribunal  cannot  mediate 
and  resolves  in  the  interest  of  cooperation  and  harmony." 


XVII 
LOCAL   REPRESENTATIVE   GOVERNMENT 

About  twenty  years  ago  the  clothing  manufacturers 
of  Rochester,  New  York,  formed  among  themselves 
a  trade  association.  Since  then  the  association  has  de- 
veloped into  a  definite  organization  of  the  employers 
of  the  market — The  Clothiers'  Exchange — chiefly  with 
the  purpose  of  collective  action  in  dealing  with  Labor, 
The  word  "market"  as  used  in  the  clothing  industry 
means  a  clothing  manufacturing  center  of  consider- 
able size.  The  Rochester  market  comprises  eighteen 
houses,  including  all  the  chief  clothing  manufacturers 
except  one.  The  executive  body  is  the  Labor  Commit- 
tee, composed  of  five  employers,  who  have  a  decision 
in  matters  affecting  the  market  as  a  whole.  Questions 
of  policy  are  referred  to  this  committee  by  the  indi- 
vidual houses. 

The  Clothiers'  Exchange  maintains  an  ofifice  with  an 
executive  director,  a  secretary,  and  a  statistician.  Rec- 
ords are  kept,  correspondence  is  undertaken  with  other 
markets,  research  studies  are  made.  The  office  serves 
as  headquarters  for  employers  and  labor  managers. 

In  April,  19 19,  the  Clothiers'  Exchange  met  the 
Rochester  Joint  Board  of  the  Amalgamated  Clothing 
Workers  of  America  to  form  a  Labor  Adjustment 
Board,  which  should  rule  in  all  matters  affecting  Labor 
in  the  local  clothing  industry.     At  first  the  constitu- 

235 


236  INDUSTRIAL  GOVERNMENT 

tion  of  this  government  rested  on  a  "gentlemen's  agree- 
ment" between  the  president  of  the  Clothiers'  Ex- 
change and  the  president  of  the  Union.  But  the  re- 
newal of  the  Agreement,  in  the  summer  of  1920,  for 
a  period  of  two  years,  was  signed  by  representatives  of 
the  two  parties  only  after  it  had  been  ratified  by  a  ref- 
erendum vote  in  which  every  individual  worker  and 
every  individual  employer  took  part.  The  new  agree- 
ment differs  from  the  old  only  in  its  clearer  statement 
of  aims  and  in  certain  definite  reforms  to  be  accom- 
plished and  principles  to  be  realized. 

The  first  principle  established  is  that  of  collective 
bargaining.  The  Agreement  specifically  recognizes  the 
right  of  employees  to  organize,  and  the  duty  of  em- 
ployers to  deal  with  their  workers,  through  the  agency 
of  the  Union,  in  all  matters  affecting  wages  and  work- 
ing conditions.  There  is  to  be  no  more  changing  of 
orders  at  the  whim  of  superintendent  or  foreman; 
each  separate  executive  decision  must  be  in  harmony 
with  the  Agreement.  Nor  is  the  whim  of  the  work- 
ers to  tie  up  production.  It  is  definitely  set  forth  in 
the  Agreement  that  there  shall  be  no  strikes,  lock-outs, 
or  stoppages  of  work  in  the  industry.  Each  plant  has 
its  house  organization  for  adjusting  the  complaints 
of  employees.  When  a  difference  arises  that  cannot 
be  settled  in  this  way,  there  is  further  machinery  in 
the  market  for  handling  it.  In  brief,  the  policy  is  one 
of  mutual  and  constant  adjustment  between  the  em- 
ployer and  the  employee,  in  the  individual  shop  and 
in  the  market  as  a  whole. 

The  Agreement  recognizes  a  modified  "open  union 
shop"  policy.  The  power  of  hiring  is  to  remain  with  the 
employer,  but  the  fact  of  membership  in  the  Union 


REPRESENTATIVE  GOVERNMENT    237 

must  not  be  a  cause  for  discrimination  against  an 
applicant  for  employment.  The  Impartial  Chairman 
is  given  the  right  to  review  the  policy  of  any  house 
which  appears  to  have  been  guilty  of  such  discrimina- 
tion. In  case  of  discharge,  also,  the  employee  has  the 
right  of  appeal  through  the  Union  to  the  Impartial 
Chairman;  if  the  Chairman  finds  that  the  discharge  was 
not  for  sufficient  cause,  the  employee  is  reinstated  with 
pay  for  time  lost.  There  are  to  be  no  lay-offs ;  in- 
stead the  principle  of  equal  division  of  work  among  all 
employees  is  accepted.  This  principle  is  being  applied 
during  the  present  slack  season.  Permanent  reduc- 
tions in  force  are  permitted — but  they  must  be  proved 
to  be  permanent.  This  is  perhaps  the  greatest  gain 
to  the  Union  under  the  new  Agreement. 

The  right  of  the  employer  to  manage  his  own  shop 
is  admitted,  as  is  his  right  to  introduce  what  changes 
in  manufacturing  methods  he  sees  fit.  But  if  such 
changes  result  in  loss  to  the  employees,  the  matter  may 
be  brought  before  the  Impartial  Chairman.  Changes 
in  the  general  wage  levels  or  in  hours  of  work  may 
be  considered,  upon  petition  of  either  side,  if  the  La- 
bor Adjustment  Board  judges  that  changes  in  the  cloth- 
ing industry  or  industrial  changes  generally  make  such 
new  arrangements  advisable.  In  case  of  a  disagree- 
ment on  this  as  on  other  points,  decision  rests  with 
the  Impartial  Chairman.  Readjustments  of  wages  of 
individuals  or  of  sections  may  be  considered,  upon  pe- 
tition of  either  party,  on  the  ground  that  such  read- 
justment is  necessary  "to  remove  serious  and  unjust 
inequalities  in  pay" ;  but  this  matter  may  be  consid- 
ered by  the  Impartial  Chairman  only  when  he  is  spe- 
cially so  authorized  by  the  Labor  Adjustment  Board. 


238  INDUSTRIAL  GOVERNMENT 

Other  articles  in  the  Agreement  provide  for  a  mini- 
mum wage  for  beginners,  fix  the  working  week  at 
forty- four  hours,  with  pay  at  the  rate  of  time  and  a 
half  for  overtime,  authorize  the  Labor  Adjustment 
Board  to  exercise  sanitary  control  in  the  shops,  and 
urge  the  abolition  of  home  work. 

The  representative  of  the  employer  in  Labor  mat- 
ters in  each  shop  is  the  Labor  Manager,  an  expert  in 
adjustment,  trained  not  in  any  apprenticeship  to  the 
trade,  but  in  the  school  of  liberal  arts,  by  a  culture  of 
mind  and  soul  which  develops  a  broad  sympathy  with 
humanity.  And  he  should  be  something  of  the  soci- 
ologist, of  the  philosopher,  of  the  poet  in  that  he  is 
the  firm's  representative  who  must  see  first  the  man 
in  the  employee,  and  so  be  able  to  guess  at  the  human 
motives  for  the  attitude  he  takes  toward  his  work  and 
his  life.  This  new  kind  of  labor  manager  has  brought 
into  the  industry  something  vital  which  before  had  been 
missing. 

The  atmosphere  of  his  office  is  hardly  that  of  the 
factory;  it  bears  rather  the  marks  of  the  professor's 
study.  The  bookcases  are  well  filled,  the  periodicals 
on  the  side  table  are  of  the  literature  which  would  in- 
terpret life;  significant  in  the  work-room  of  the  hu- 
man relations  man.  More  often  than  not  the  Labor 
Manager  is  to  be  addressed  as  "Doctor";  the  title  is 
most  carefully  and  reverentially  applied,  as  if  indus- 
try were  not  only  proud  but  also  a  little  awed  by  its 
new  acquisition. 

Not  that  this  Labor  Manager  is  essentially  a  the- 
oretical person,  but  that  he  has  brought  to  the  study  of 
actual  facts  and  conditions  a  background  of  unimpas- 
sioned  survey  of  general  truths,  and  the  critical  atti- 


REPRESENTATIVE  GOVERNMENT    239 

tude  of  the  scholar  who  has  learned  to  resist  the  en- 
thusiasms of  either  side  of  a  controversy.  He  has  not 
come  into  business  to  bring  academic  rules  of  conduct, 
but  to  contribute  to  the  consideration  of  what  these 
business  men  and  workers  see  as  an  impasse,  a  mind 
which  has  been  sharpened  to  cut  through  problems. 

And  the  employees  who  knock  at  the  door  of  his 
office  are  received  in  a  manner  very  different  from 
that  which  they  once  met  at  the  "employees'  entrance." 
The  professor — pardon! — the  Labor  Manager  is  first 
of  all  a  gentleman.  His  habit  is  to  bow  courteously 
to  a  visitor  and  to  offer  a  chair — a  leather-cushioned 
chair.  And  really,  it  is  not  a  bad  plan ;  a  man  cannot 
fight  in  a  comfortable  chair  as  he  can  when  he  is 
standing  in  the  cold.  No  more  can  he  fight  a  sympa- 
thetic listener.  The  Labor  Manager  is  there  to  listen 
to  grievances,  to  judge  them  with  reference  to  the 
Agreement  and  with  reference  to  the  causes  behind 
them.  His  training  disposes  him  to  look  for  more 
than  one  possible  cause  for  every  phemonenon.  His 
contribution  to  an  understanding  of  the  Labor  Prob- 
lem ought  to  be  valuable. 

The  seven  Labor  Managers  in  the  Rochester  cloth- 
ing market  meet  each  week  together  as  a  Boa-d  to  co- 
operate in  the  preparation  of  cases  to  come  before  the 
Impartial  Chairman  where  the  decision  will  affect  the 
market  as  a  whole,  or  to  draw  up  policies  for  con- 
certed action.  They  have  meetings,  for  instance,  rela- 
tive to  the  Union's  demand  for  a  minimum  wage  for 
learners.  They  have  been  trained  to  research:  they 
collect  data  on  the  minimum  wage  laws  of  different 
states,  on  wage  levels  in  the  other  industries  of  Roch- 
ester, on  wages  in  the  clothing  industry  in  other  cen- 


240  INDUSTRIAL  GOVERNMENT 

ters.  They  try  to  classify  the  bHnd-alley  jobs  in  the 
clothing  industry,  and  they  study  the  possibilities  for 
learners  in  the  continuation  schools.  The  Board  of 
Labor  Managers  looks  ahead  and  plans  harmonious 
action  in  meeting  changes  which  it  foresees  in  the  in- 
dustry. 

Again,  the  Labor  Managers  meet  with  a  committee 
of  the  Joint  Board  of  the  Union.  This  meeting  to- 
gether constitutes  the  Labor  Adjustment  Board.  This 
board  is  the  legislative  body  in  the  local  industrial  gov- 
ernment. On  the  Board  each  side  has  one  collective 
vote:  the  Impartial  Chairman  presides  and  casts  the 
deciding  vote.  All  disputes  or  differences  over  ques- 
tions arising  under  the  Agreement  which  the  parties  to 
the  Agreement  are  unable  to  adjust  among  themselves 
are  referred  to  the  Board  for  adjustment  or  arbitra- 
tion. The  Board  has  full  and  final  jurisdiction  over 
all  such  questions  and  its  decisions  are  conclusive,  un- 
less otherwise  provided  by  the  parties  to  the  Agree- 
ment. Except  when  the  Board  itself  shall  otherwise 
determine,  the  chairman  of  the  Board — the  "Impar- 
tial Chairman" — is  authorized  to  take  original  juris- 
diction of  all  cases  and  controversies  arising  under 
the  Agreement  and  to  adjust  or  decide  them  in  accord- 
ance with  the  rules  of  practice  and  procedure  estab- 
lished by  the  Board.  Decisions  of  the  Chairman  are 
binding  on  both  parties. 

Technically  the  judicial  power  of  the  government, 
together  with  the  legislative  and  the  executive,  resides 
in  the  Labor  Adjustment  Board.  But  as  it  is  the  Im- 
partial Chairman  who  there  casts  the  deciding  vote, 
such  power  actually  devolves  upon  his  person.  He 
is  chosen  by  mutual  agreement  of  the  Clothiers'  Ex- 


REPRESENTATIVE  GOVERNMENT    241 

change  and  the  Amalgamated  Clothing  Workers  of 
America.  The  expenses  of  his  office  are  borne  equally 
by  the-  two  parties. 

Not  only  in  the  case  of  a  grievance,  but  also  for  the 
building  up  of  a  general  market  policy  Labor  Managers 
and  Union  officials  meet  in  conference.  For  the  at- 
tempt is  being  made  to  establish  government  where 
anarchy  has  reigned.  It  is  still  the  exception  in  in- 
dustry for  the  representatives  of  the  employers  in  a 
market  to  meet  weekly  for  discussions  leading  to  a 
common  plan  of  management;  it  is  perhaps  more  un- 
expected to  find  Union  officials  meeting  with  this  group 
to  cooperate  in  the  development  of  such  a  plan.  So 
all  along  the  line,  from  a  petty  shop  difficulty  to  a 
major  market  policy,  the  two  sides  come  together  to 
effect  an  adjustment.  And  when  the  two  sides  can- 
not agree,  they  go  together  to  the  Impartial  Chairman, 
and  whatever  his  decision  may  be,  they  accept  it.  This 
marks  the  beginning  of  a  new  stage  in  the  development 
of  industrial  government  in  the  men's  clothing  indus- 
try— that  of  an  organized  market.  Establishment 
government  came  in  with  the  Hart,  Schaffner  and 
Marx  agreement  in  19 10.  The  Rochester  Agreement 
applies  the  same  principle  to  a  larger  sphere. 

The  Agreement  provides  a  definite  procedure  for 
the  handling  of  grievances.  The  employees  from  each 
shop  hold  "shop  meetings"  in  the  Union  hall.  Here 
they  elect  shop  Chairmen  and  Section  Chairmen. 
Thereafter  any  worker  who  has  a  grievance  reports  it 
to  his  Shop  Chairman,  who  then  takes  it  up  with  the 
Labor  Manager  of  the  house.  If  the  Labor  Manager 
and  the  Shop  Chairman  cannot  arrive  at  a  satisfac- 
tory settlement,  they  call  in  a  Union  representative. 


242  INDUSTRIAL  GOVERNMENT 

If  then  no  solution  can  be  reached,  the  matter  is 
brought  before  the  Impartial  Chairman.  The  pro- 
cedure is  similar  where  it  is  the  foreman  who  brings 
complaint. 

For  some  time  after  the  adoption  of  the  original 
Agreement,  in  the  spring  of  19 19,  there  was  no  Im- 
partial Chairman,  It  was  necessary  that  the  Labor 
Manager  and  Union  official  should  agree.  And  as 
both  were  courteous,  both  interested  in  the  accomplish- 
ment of  order  in  industry,  both  eager  to  act  according 
to  the  ethics  involved,  mutual  agreements  were  usual. 
And  when  the  Impartial  Chairman  assumed  his  role, 
he  aimed  at  interpretation  of  joint  interest  rather  than 
arbitration.  He  brought  representatives  of  the  two 
sides  together,  and  watched  them  adjust  their  differ- 
ences; he  did  not  hand  down  a  decision  in  the  spirit 
of  a  judge.  But  personal  convictions  are  in  danger 
of  being  lost  in  positions;  each  side  pushed  its  repre- 
sentative for  an  advantageous  decision.  The  repre- 
sentative had  to  be  an  advocate,  perhaps  at  times  even 
an  instructed  delegate.  And  he  who  stood  for  the  los- 
ing side  was  glad  to  shift  the  responsibility  of  the  de- 
cision on  to  a  judge.  More  and  more  the  spirit  of 
the  lawyer  is  emerging  in  the  court  room. 

The  attempt  is  made  to  keep  the  hearing  free  from 
a  legalistic  atmosphere.  The  Impartial  Chairman — 
Dr,  William  M.  Leiserson — sits  at  a  long  table.  Op- 
posite him  there  are  rather  comfortable  chairs.  The 
procedure  is  for  the  Labor  Manager  and  the  Union 
official  each  in  turn  to  examine  the  witnesses.  Smok- 
ing is  permitted.  Although  the  object  is  informality, 
the  dramatic  possibilities  of  the  situation  are  often  too 
great  a  temptation  to  the  agents,  who  take  delight  in 


REPRESENTATIVE  GOVERNMENT     243 

introducing  the  formal  language  of  the  court  room. 
This  is  perhaps  less  true  of  the  year  1920  than  of  1919, 
now  that  the  novelty  has  worn  off. 

The  "judge"  enjoys  his  pipe.  He  allows  eloquence 
to  have  its  way  for  a  while;  he  smiles  appreciation  at 
the  good  stories  which  lighten  the  day's  business.  But 
at  length  it  becomes  necessary  to  call  the  court  back  to 
the  main  line  of  argument,  and  to  warn  a  side  which 
has  been  weak  in  the  presentation  of  its  case:  "Now 
this  is  impressing  me,  and  unless  you  can  answer  it, 
it  is  going  to  influence  me  when  I  form  my  conclu- 
sions."    For  the  "judge"  is  an  impartial  chairman. 

Dr.  Leiserson  insists  that  his  position  is  less  that 
of  an  arbitrator  between  opposing  parties  than  of  an 
interpreter  of  the  law  inaugurated  by  agreement  be- 
tween these  two  parties,  and  of  an  agent  responsible 
for  the  application  of  this  law  to  specific  cases.  When- 
ever questions  come  before  him  which  do  not  seem  to 
be  covered  by  the  provisions  of  the  Agreement,  he 
calls  for  a  discussion  at  the  next  meeting  of  the  Labor 
Adjustment  Board.  He  gets  the  two  sides  to  tell  him 
what  they  believe  the  law  should  be :  he  aims  to  avoid 
judge-made  law.  He  tries  to  get  both  sides  to  agree 
on  the  principle  involved.  The  principle  established, 
it  then  forms  the  basis  of  precedent.  While  the  Chair- 
man does  not  wish  to  be  bound  by  precedent,  he  feels 
that  only  by  determining  such  principles  and  definite 
rules  of  procedure  can  a  body  of  law  be  built  up  to 
which  each  side  may  know  how  to  conform. 

The  normal  business  of  the  "court"  is  four  cases  a 
week.  The  first  year  there  were  two  hundred  cases. 
The  subjects  varied ;  the  majority  had  to  do  with  wages 
or  discipline. 


244  INDUSTRIAL  GOVERNMENT 

Some  workers  have  been  impatient  and  unwilling  to 
wait  for  the  machinery  to  take  care  of  their  grievances. 
Sometimes  a  group  walks  out,  but  only  to  be  ordered 
back  by  a  Union  official  so  that  the  grievance  may  fol- 
low due  process  of  law.  Dr.  Leiserson  always  re- 
fuses to  hear  a  case  while  the  men  are  out  or  until  they 
have  paid  the  penalty  applied  in  such  cases,  which  is 
to  work  off  the  time  lost  in  overtime,  but  at  straight 
time  rate  of  pay.  In  several  cases  of  flagrant  defiance 
the  time  to  be  worked  off  has  been  doubled.  The  ob- 
ject of  the  Agreement  is  that  the  machinery  is  to  carry 
off  the  friction  without  interrupting  the  smooth  course 
of  production. 

The  Union  must  discipline  its  own  members.  This 
is  not  always  an  easy  task.  Human  nature  will  crop 
out.  It  has  even  been  known  to  happen  that  while 
the  Union  was  making  a  strong  appeal  for  the  prefer- 
ential shop,  individuals  members  have  urged  on  a  La- 
bor Manager  the  employment  of  sister  or  cousin  whom 
the  Union  had  not  recommended. 

But  the  Union  spirit  is  growing  stronger.  Where 
not  long  ago  Union  leaders  held  together  masses  of 
men  and  women  by  force  of  personality,  today  initia- 
tive is  coming  from  the  ranks  of  the  workers  them- 
selves. Today  a  "class-conscious"  Union  is  pushing 
ahead,  while  the  leaders  bear  down  on  the  brakes  be- 
cause they  feel  that  the  time  has  not  come  for  pre- 
senting many  of  the  demands  which  have  been  voiced. 
The  radical  element  would  like  to  take  over  the  indus- 
try and  run  it :  their  leaders  know  that  they  have  not 
the  ability  nor  the  experience  for  such  a  project.  Nor 
are  these  radicals  the  most  numerous,  although  pos- 


REPRESENTATIVE  GOVERNMENT     245 

sibly  the  most  vociferous,  of  the  thirteen  thousand 
Union  members  in  Rochester. 


APPRENTICESHIP 

A  real  problem  just  now  is  presented  to  both  sides 
in  the  question  of  giving  training  to  new  employees, 
and  to  those  who,  already  in  the  industry,  remain  un- 
skilled. In  19 19  because  of  the  acute  shortage  of 
skilled  labor,  it  was  felt  to  be  necessary  to  establish 
training  departments  for  beginners.  Formerly  the 
tailor  learned  his  trade  in  the  sweat-shop  as  "helper" 
to  a  home-worker:  if  we  abolish  the  sweat-shop  we 
must  provide  some  other  gateway  to  the  industry. 
Formerly  America  let  Europe  train  her  cutters  for  her, 
but  this  is  hardly  a  satisfactory  solution  of  the  prob- 
lem of  trade  education.  Rosenberg  Brothers  took  the 
lead  among  Rochester  plants  by  opening  at  Fashion 
Park  a  vestibule  school  in  a  small  cottage  on  the 
grounds.  Unskilled  employees  are  put  through  a 
course  of  training  in  essentials  here  before  being  passed 
on  to  the  main  factory.  The  employment  executive 
frequently  visits  the  school  to  encourage  the  pupils 
whom  she  has  sent  there. 

The  recent  establishment  of  a  minimum  wage  is 
making  the  education  of  apprentices  imperative.  The 
manufacturer  can  no  longer  tolerate  the  semi-skilled 
"helper"  on  his  pay  roll.  Moreover,  Dr.  Leiserson  is 
holding  manufacturers  responsible  for  bringing  up  the 
production  of  individual  workers  to  a  level  with  that 
of  better  workers  in  the  same  class.  When  a  man  is 
doing  his  best,  and  his  low  production  record  is  due 
to  poor  training,  the  Impartial  Chairman  refuses  to 


246         INDUSTRIAL  GOVERNMENT 

permit  that  he  be  paid  at  a  lower  rate  than  the  better 
workers.  The  Chairman  also  refuses  to  permit  his 
discharge,  if  he  has  been  retained  beyond  the  period  of 
probation.  In  specific  cases  the  Chairman  has  ruled 
that  industrial  training  is  a  responsibility  of  the  man- 
agement and  not  of  the  men.  The  Agreement  is  at 
stake,  for  industrial  democracy  is  impossible  with  un- 
fit workers. 

CONTRACTORS 

Another  problem  which  must  be  met  is  that  of  the 
contractors.  There  are  at  least  eighty  contract  shops 
in  Rochester;  all  but  one  are  organized  by  the  Union. 
Workers  in  them  enjoy  the  benefits  of  the  Agreement. 
In  case  of  grievances  in  the  contractors'  shops,  the  con- 
tractor is  represented  by  the  Labor  Manager  of  the 
house  which  has  given  out  the  contract.  Lately  the 
local  Board  of  the  Union  has  put  forward  a  plan  for 
a  cooperative  vest  shop,  to  be  operated  by  the  Union, 
as  a  contract  shop,  receiving  work  from  the  manufac- 
turers. The  workers  would  then  control  their  own 
production,  but  would  be  relieved  from  the  cares  of 
purchasing,  cutting  to  style,  and  marketing.  It  has 
been  suggested  that  in  time  such  Union  contract  shops 
might  take  over  the  making  of  the  whole  suit,  leaving 
to  the  manufacturer  only  the  role  of  merchant-mid- 
dleman. 

FEDERATION 

It  is  often  asked :  to  what  do  the  workers  look  for- 
ward? In  the  summer  of  1920,  Joseph  Schlossberg, 
national  secretary  of  the  Amalgamated  Clothing  Work- 
ers of  America,  attended  the  international  congress  of 


REPRESENTATIVE  GOVERNMENT    247 

clothing  workers  at  Copenhagen.  He  reported  its 
purpose  "to  bring  about  one  all-inclusive  organization, 
nationally  and  internationally,  of  all  branches  of  the 
men's  and  women's  wearing  apparel."  Collective  bar- 
gaining on  a  world-wide  scale?  One  Big  Union  of 
overwhelming  proportions?  At  present  the  American 
clothing  workers  possess  far  greater  advantages  than 
the  clothing  workers  of  other  countries,  and  the  im- 
mediate aims  of  the  organization  are  to  bring  to  Euro- 
pean workers  some  of  these  advantages.  Nor  only 
for  altruistic  reasons:  if  the  European  workers  were 
more  content  at  home,  they  would  not  come  to  flood 
the  American  market  with  cheap  labor. 

The  employers  also  have  been  preparing  for  collec- 
tive bargaining  on  more  than  a  local  scale.  The  Roch- 
ester Agreement  was  a  step  in  advance.  It  was  fol- 
lowed, in  May,  1919,  by  the  organization  of  the  Chi- 
cago market.  Labor  Managers  and  Impartial  Chair- 
men began  to  function  in  Baltimore  and  in  New  York, 
in  Boston  and  in  the  Canadian  markets  of  Montreal 
and  Toronto.  But  this  was  perhaps  not  the  final  step 
in  the  organization  of  industrial  government  in  the 
clothing  industry.  An  unprecedented  demand  for  their 
product  led  to  rivalry  between  markets  to  attract  labor 
at  any  price.  The  result  was  steadily  increasing  la- 
bor costs  which  were  becoming  more  and  more  em- 
barrassing to  the  industry  as  a  whole.  The  markets 
saw  that  they  were  working  at  cross  purposes :  they 
were  ready  to  consider  cooperation.  The  result  has 
been  a  federation  of  the  exchanges  and  boards  of  em- 
ployers in  the  different  markets  which  now  include  all 
but  three  or  four  of  the  important  firms  in  the  coun- 
try.    The  executive  board  of  the  national  federation 


248  INDUSTRIAL  GOVERNMENT 

was  made  up  of  one  manufacturer  and  one  labor  man- 
ager from  the  Rochester,  New  York,  Chicago,  and 
Baltimore  markets.  Final  and  complete  cooperation 
in  labor  matters  was  hoped  for  from  a  joint  labor 
council  consisting  of  the  manufacturers  on  the  one 
hand,  represented  by  officers  of  the  national  federa- 
tion and  of  a  committee  of  the  Union  on  the  other. 

The  national  board  was  hailed  by  both  sides  as  the 
logical  outcome  of  collective  bargaining,  as  an  expres- 
sion of  democracy  in  industry.  One  year  later  we 
find  less  enthusiasm.  How  permanent  this  national 
federation  of  clothing  manufacturers  will  be  it  is  at 
present  not  possible  to  predict.  Existing  chaos  in  the 
New  York  and  Boston  markets,  February,  1921,  has 
caused  many  to  doubt  the  continuance  of  any  sort  of 
government  in  the  industry.  However  that  may  be,  a 
development  of  greater  promise  than  the  federation  is 
the  cooperation  between  the  Impartial  Chairmen  of  the 
different  markets,  and  their  attempt  to  standardize  the 
body  of  the  law. 

Unshaken  by  disappointments  in  the  New  York  and 
Boston  markets,  the  Rochester  Agreement  continues 
to  hold  the  respect  of  both  parties.  The  test  will  come 
this  year  or  next,  with  the  price-cutting  and  the  hard 
times.  Last  year  in  the  labor  market  the  workers  had 
the  upper  hand :  it  was  to  the  employer's  advantage 
that  they  held  to  the  Agreement.  At  times  they  chafed 
under  the  law,  and  thought,  perhaps  with  regret,  of 
the  days  when  to  the  strongest  of  the  lawless  belonged 
the  spoils.  This  year,  with  depression  in  the  market, 
the  workers  benefit — especially  by  reason  of  the  rules 
prohibiting  lay-offs  and  arbitrary  reductions  of  wages. 
Now  it  is  possible  that  the  employer  chafes.     It  is  well 


REPRESENTATIVE  GOVERNMENT    249 

that  each  side  has  had  its  turn:  each  side  has  experi- 
enced the  benefits  of  law  and  order,  and  each  side  has 
been  disciplined.  A  crisis  was  passed  last  summer 
(1920)  when  the  Agreement  was  renewed  without 
wage  increases,  although  with  substantial  gains  to 
the  union  in  other  particulars. 

On  the  whole,  both  manufacturers  and  union  have 
been  satisfied  with  the  results  of  the  Agreement.  Sid- 
ney Hillman,  president  of  the  Amalgamated  Clothing 
Workers  of  America,  rejoiced  in  the  1919  Agreement 
with  the  words :  "Collective  bargaining  is  past ;  instead 
we  have  the  beginning  of  joint  control  in  industry." 
Employers  expressed  the  hope  that  the  new  plan  would 
"substitute  natural  adjustment  for  constant  friction," 
Today  each  side  might  claim  realization  of  these  hopes. 
Certainly  a  distinct  "spirit"  has  been  developed  in  the 
Rochester  market,  if  not  fully  a  spirit  of  brotherly 
love,  at  least  one  of  absence  of  hostility.  The  visitor 
senses  it.  It  may,  after  all,  be  nothing  more  than  a 
forming  habit  of  law-abidingness,  now  that  there  is  a 
growing  law,  whose  clear  object  is  justice. 

That  attitude  is  becoming  not  unusual  which  was 
expressed  by  Dr.  Leiserson  in  a  talk  which  he  gave  in 
one  of  the  other  markets  last  winter:  "It  is  just  as 
foolish  for  an  employer  of  human  beings  to  think  that 
he  should  be  allowed  to  run  'his  business'  as  he  'sees 
fit'  as  it  was  for  the  medieval  king  to  claim  the  divine 
right.  ...  It  is  just  as  erroneous  for  employees  to 
think  that  they  should  take  over  a  business  and  operate 
it  according  to  their  own  ideas  as  it  has  always  proved 
for  anarchists  to  destroy  the  elements  of  govern- 
ment. .  .  .  Labor  management  means  control,  disci- 
pline, an  industrial  organization  held  together  by  rules, 


250  INDUSTRIAL  GOVERNMENT 

orders,  and  authority,  reaching  down  from  an  execu- 
tive head  at  the  top.  Collective  bargaining  implies  a 
questioning  of  that  authority.  ...  It  says  that  there 
must  be  no  rules  or  orders  affecting  the  lives  and  wel- 
fare of  the  wage-earners  without  the  consent  of  those 
who  must  obey  them.  ...  It  joins  the  members  of  the 
industrial  organization  into  a  Union  and  forms  a  demo- 
cratic legislative  body  for  the  purpose  of  giving  to 
those  who  have  to  obey  the  laws  of  industry  a  voice 
in  determining  what  those  laws  shall  be." 


XVIII 
THE  UNION  IN  CONTROL 

The  past  few  years  have  been  stormy  and  disap- 
pointing to  capitalists  in  the  Brewery  business.  But 
there  was  one  circumstance  for  which  they,  at  least, 
should  be  thankful ;  they  had  until  the  very  end  of  the 
struggle  the  loyal  support  of  the  organized  workers 
whom  they  employed.  They  had  recognized  labor 
years  ago,  and  this  was  their  reward. 

The  labor  situation  at  the  Huebner  Brewing  Com- 
pany, Toledo,  Ohio,  is  especially  interesting  since  this 
is  the  state  that  has  had  the  most  fiercely  and 
persistently  contested  prohibition  struggle  of  any 
commonwealth  in  North  America,  The  wets  and  drys 
have  been  fighting  for  twenty  years  at  the  ballot  box. 
These  local  option  elections,  and  later  state-wide  refer- 
endums,  have  been  veritable  Swords  of  Damocles  for 
Ohio  breweries.  It  has,  therefore,  been  unsafe  for 
them  to  challenge  organized  labor  and  go  to  the  indus- 
trial mat  for  a  knock-out.  They  have  had  to  depend 
upon  the  votes  and  good-will  of  labor,  for  a  militant 
Anti-Saloon  League  was  ever  hanging  on  their  flanks 
to  take  advantage  of  any  opportunity  to  vote  them  out 
of  business. 

But  the  brewery  workers  also  feared  this  prohibition 
menace.  Many  of  them  had  been  brewery  workers 
all  their  lives.     All  their  hopes,  they  thought,  were 

251 


252  INDUSTRIAL  GOVERNMENT 

wrapped  up  with  the  continued  existence  of  this  in- 
dustry. If  the  industry  should  be  outlawed,  they 
would  be  forced  into  other  industries  and  quite  likely 
down  into  the  ranks  of  the  unskilled.  There  has  prob- 
ably never  been  a  time  when  the  proletariat  and  the 
capitalist  have  had  so  much  in  common  as  in  the  long- 
drawn-out  struggle  between  booze  and  prohibition. 
The  capitalist  not  only  gave  the  worker  his  job,  but 
he  also  was  the  great  defender  of  that  job  against  a 
host  bent  upon  destroying  it.  The  brewery  workers 
were  militant  and  powerful  but  if  they  had  dared  to 
knock  out  the  capitalist  they  would  have  "killed  the 
job"  with  that  same  blow. 

The  brewery  workers  have  an  industrial  union. 
Each  craft  may  have  its  own  local,  but  all  must  sub- 
mit to  one  international  authority.  The  three  locals 
at  Toledo  unite  in  a  District  Council,  which  negotiates 
the  Labor  Agreement.  Before  the  District  Council 
can  sign  a  labor  contract,  it  must  be  approved  by  the 
General  Executive  Board  of  the  International  Union. 
The  International  has  general  standards  which  it  re- 
quires, and  so  takes  this  method  of  securing  approxi- 
mately uniform  conditions  throughout  the  industry. 
So,  the  general  features  of  the  labor  policy  at  Hueb- 
ner's  will  hold  true  for  other  breweries  of  the  country 
that  bargained  with  the  union. 

On  the  employers'  side  the  contracting  is  done  by  a 
Joint  Executive  Board  representing  the  five  brewing 
companies  of  Toledo.  The  agreement,  therefore,  is 
city  wide.     It  became  effective  in  July,  19 19. 

The  union  label  is  everywhere  in  evidence  in  and 
about  the  Huebner  brewery.  The  label  is  on  all  the 
products  that  go  out,  and  on  about  all  the  raw  mate- 


THE  UNION  IN  CONTROL  253 

rials  that  come  in.  Union  labor  made  the  Huebner 
beer  and  drank  most  of  it.  The  company  had  every- 
thing to  gain  and  nothing  to  lose  by  putting  the  label 
on  all  its  products.  So,  it  was  specified  in  the  agree- 
ment that  the  union  should  supply  the  company  with 
labels  in  lots  of  1,000  at  a  time  and  see  to  it  that  a 
label  is  on  every  barrel,  keg,  case,  etc.,  that  carries 
away  the  Huebner  products.  But  the  company  must 
see  to  it,  in  return,  that  the  union  label  is  on  all  the 
malts,  grits,  cereals,  brooms,  brushes,  cases,  which  it 
buys.  Union  preference  extends  to  all  the  materials 
purchased  by  the  company.  The  brewery  workers 
demonstrate  their  solidarity  with  their  fellow  workers 
of  the  other  organized  trades  by  enforcing  patronage 
of  the  union  label. 

The  brewery  workers  got  their  beer  free.  They  had 
it  written  in  the  agreement  that  "employees  except 
drivers  may  receive  a  reasonable  quantity  of  beer  free 
of  charge  (a)  before  starting  to  work;  (b)  at  9:00 
A.M.  and  at  10 130  A.M. ;  (c)  twice  during  lunch  hour; 
(d)  once  in  the  afternoon;  (e)  and  at  quitting  time." 
And  the  employer  had  to  keep  the  beer  at  the  "proper 
temperature."  No,  the  drivers  were  not  ruled  out. 
They  were  to  receive  "not  to  exceed  four  small  bot- 
tles" a  day. 

Once  a  mooted  question,  free  beer  seems  now  to  be- 
long to  the  ages. 

The  eight-hour  day  is  firmly  established.  Eight 
hours  within  nine  hours,  with  one  hour  off  for  lunch 
and  drinks — so  reads  the  agreement.  The  six-day 
week  is  enjoyed  by  all  except  the  stablemen,  who  must 
work  seven  days,  but  their  score  is  evened  up  by  giving 
them  four  days  off  per  month  with  pay. 


254  INDUSTRIAL  GOVERNMENT 

There  is  no  evidence  of  speeding  up  or  overwork. 
It  is  not  the  company  but  the  union  that  prescribes  the 
conditions  of  labor  here.  No  union  member  can  be 
compelled  "to  pile  up  full  half  barrels  too  high  alone 
when  the  average  exceeds  50  one-half  barrels  a  day" ; 
nor  can  he  be  compelled  "to  pile  alone  three  dozen 
pints  (small)  filled  cases  more  than  four  high,  or  two 
dozen  quarts  (large)  more  than  three  high,  longer 
than  two  hours  each  day."  There  must  be  at  least 
three  men  when  it  comes  to  unloading  malts,  grits,  rice, 
or  sugar  from  a  loaded  car.  A  man  who  is  working 
in  a  warm  room  cannot  be  transferred  at  once  into  a 
cold  department.  While  the  bottle  worker  is  cleaning 
the  "soaker  and  pasteurizer,"  he  is  dressed  in  a  suit 
of  overalls  and  in  a  pair  of  boots  (or  wooden  shoes) 
furnished  by  the  company.  One  notes  that  all  the 
wagons  and  auto  trucks  have  cushioned  seats  and 
"suitable  tops" — this  to  placate  the  Deliverymen.  They 
have  a  first-aid  establishment,  but  it  is  not  a  "hand- 
out" from  the  company  to  employees,  but  a  requirement 
from  the  company  by  the  union. 

Besides  the  usual  legal  holidays,  they  have  added 
another, — "Brewers'  Day."  Som^  time  during  the 
summer  the  union  and  the  company  set  a  day  for  gen- 
eral jollification,  and  the  company  pays  full  time  for 
the  day. 

The  general  agreement  is  confined  to  minimum  rates 
of  pay.  These  rates  hold  for  the  term  of  the  agree- 
ment. While  the  brewery  workers  are  upholders  of 
the  principle  of  arbitration,  they  have  not,  like  the 
Amalgamated  Clothing  Workers,  employed  arbitration 
to  effect  wage  increases  during  the  period  of  the  agree- 


THE  UNION  IN  CONTROL  255 

ment.  Flexibility  of  wage  scales  within  an  agreement 
is  especially  desirable  during  periods  of  rising  prices. 

The  minimum  rates  ranged  from  $32  per  week  in  the 
brewery  department,  which  includes  the  wash  house, 
cellar,  and  kettles,  to  %2y  per  week  for  stablemen. 
Twenty-nine  dollars  and  fifty  cents  is  the  minimum  for 
bottlers  and  keg  beer  peddlers.  Permit  card  men  get 
but  $24,  while  apprentices  receive  $23  for  the  first  year 
and  $25  for  the  second. 

Security  of  employment  is  the  great  outstanding 
feature  of  the  labor  policy.  The  company  employs 
only  union  men  of  good  standing.  When  the  company 
is  in  need  of  more  help  it  phones  to  the  local  union, 
who  have  obligated  themselves  to  supply  competent 
help  whenever  it  is  needed. 

The  company  is  forbidden  to  discharge  any  member 
"except  for  good  and  sufficient  reasons."  And  the 
agreement  proceeds  to  state  what  these  "good  and 
sufficient  reasons"  may  be.  They  are  (i)  refusal  to 
work  when  able,  (2)  neglect  of  duty,  (3)  dishonesty, 
(4)  drunkenness  while  on  duty,  (5)  disrespect  to  em- 
ployer or  foreman,  (6)  failure*  to  report  for  duty 
without  permission  from  employer  or  foreman. 

To  forestall  any  controversy  as  to  what  "disrespect" 
means,  it  is  defined  as  "assuming  of  a  defiant  or  im- 
pudent attitude  or  the  use  of  profane  language."  But 
"there  shall  be  no  disrespect  if  employer  or  foreman 
by  attitude  or  language,  give  provocation  for  same." 
So,  it  is  perfectly  legal  in  this  shop  for  a  worker  to  do 
unto  the  boss  as  the  boss  does  unto  him. 

If  the  employe  is  unable  to  report  for  duty  because 
of  sickness,  either  of  himself  or  a  member  of  his 
family,  he  can  retain  his  job  by  giving  the  employer 


256  INDUSTRIAL  GOVERNMENT 

notice  of  the  fact  on  two  different  occasions  during 
any  month.  The  company  must  hold  the  job  for  such 
an  employe  six  months.  But  if  the  employe  has  been 
injured  while  on  duty,  he  is  to  be  given  back  his  job 
any  time  within  twelve  months. 

Another  means  for  making  employment  secure  and 
equitable  is  the  system  of  layoffs  "in  rotation"  during 
slack  seasons.  Union  members  cannot  be  discharged 
by  the  employer  no  matter  how  slack  the  season.  If 
there  is  work  for  just  two-thirds  the  full  force,  the 
employer  may  lay  off  one-third  of  the  workers  for  a 
week  or  a  day,  and  at  the  end  of  this  period  lay  off 
another  one-third  while  taking  back  the  first  one-third, 
and  so  on  until  the  return  of  normal  conditions.  In 
the  Brewery  Department  the  layoff  is  "for  not  more  or 
less  than  one  week  at  a  time."  In  the  Delivery  De- 
partment workers  may  "be  laid  off,  in  rotation,  for 
not  more  than  one  day  at  a  time."  In  this  manner  the 
unemployment  is  spread  out  equally  among  the  whole 
membership. 

The  union  protects  the  jobs  of  its  members  by  not 
recruiting  its  membership  above  the  number  necessary 
to  run  the  local  breweries  in  normal  seasons.  When 
the  rush  seasons  come  the  employer  is  permitted  to 
hire  non-union  men  for  the  extra  work.  But,  when 
normal  times  return,  the  company  must  discharge  this 
non-union  contingent.  The  Bottle  Workers  take  care 
of  such  non-union  influxes  by  requiring  permit  cards, 
which  run  for  only  one  month  at  a  time.  If  a  member 
of  a  union  comes  looking  for  work,  a  permit  card 
man  must  be  dropped  at  the  expiration  of  his  card  and 
his  job  given  to  the  waiting  union  man.     Under  no 


THE  UNION  IN  CONTROL  257 

circumstance  can  a  non-union  man  compete  with  union 
members  in  this  industry. 

In  refusing  membership  to  this  additional  force,  the 
Brewery  Workers  are  simply  protecting  their  jobs. 
If  they  increased  their  numbers  during  the  rush  sea- 
sons, then  when  normal  times  returned  there  would 
not  be  enough  work  for  all  and  the  layoff  in  rotation 
system  would  bring  unemployment  to  the  original  mem- 
bership. This  condition  would  be  still  intensified  dur- 
ing the  slack  seasons.  This  is  one  case  where  job 
consciousness  drowns  out  the  class  consciousness  of 
the  Brewery  Workers. 

Again  the  union  protects  its  members  by  forbidding 
the  company  to  take  in  any  apprentices  when  union 
men  are  out  of  work  or  when  such  apprentices  would 
cause  the  layoff  of  union  workers.  The  Brewery  De- 
partment is  permitted  one  apprentice  for  every  25 
men,  or  two-fifths  fraction  thereof.  The  apprentice 
must  not  be  less  than  18  nor  more  than  21  years  of  age. 
He  is  to  spend  at  least  three  months  in  each  of  the 
four  departments,  namely,  wash  house,  kettle,  fermen- 
tation, and  chip  cellar ;  and  he  must  be  taught  to  brew 
beer,  and  then  join  the  union. 

Prohibition  came  with  January,  1920.  The  erst- 
while Huebner  Brewery  is  now  making  soft  drinks 
instead  of  beer,  with  "Ledo"  as  its  specialty.  Only 
about  two-thirds  of  the  former  labor  force  is  required 
since  this  transformation  of  the  plant.  But  the  union 
and  the  Labor  Agreement  were  still  recognized  by  the 
company.  The  labor  force  could  not  be  reduced  by 
discharges.  The  company  could  only  lay  off  in  rota- 
tion, and  thus  spread  the  unemployment  over  the  whole 
force  equally. 


258  INDUSTRIAL  GOVERNMENT 

Gradually  the  workers  found  positions  elsewhere 
and  the  numbers  diminished  until  only  about  two- 
thirds  of  the  old  force  was  left.  This  statement  must 
not  be  construed  as  meaning  that  the  Brewery  Workers 
have  not  suffered  during  this  transition  period.  Most 
of  them  have  taken  new  jobs  because  these  were  bet- 
ter than  but  two-thirds  of  the  former  pay.  Nor  are 
the  prospects  bright  for  those  who  remain.  There  is 
not  as  much  profit  in  soft  drinks  as  in  beer,  and  this 
fact,  coupled  with  the  expenses  of  transformation  and 
of  establishing  a  new  trade,  has  depleted  the  reserves 
of  the  companies.  Union  leaders  who  ask  for  ad- 
vances in  wages  to  keep  up  with  the  still  jumping  costs 
of  living  are  taken  to  the  books  and  shown  deficits  on 
the  new  operations. 

But  the  Brewery  Workers  have  the  militant  spirit 
that  overcomes  obstacles.  If  they  come  through  with 
their  organization  intact,  it  will  be  the  first  time  in 
the  history  of  modern  industry  that  a  Trade  Union 
has  been  able  to  survive  the  destruction  of  an  industry. 

There  is  no  complicated  machinery  here  for  carry- 
ing out  the  agreement.  A  member  who  feels  that  he 
has  a  grievance  may  try  to  settle  directly  with  the  man- 
agement, or  he  may  put  his  case  in  the  hands  of  the 
Business  Agent  of  his  local^  who  takes  it  up  with 
the  management.  Nearly  all  cases  are  settled  in  this 
simple  manner.  But  if  an  agreement  cannot  be  reached 
in  this  way,  then  the  case  goes  to  arbitration. 

The  Board  of  Arbitration  is  made  up  of  two  ap- 
pointees of  the  company  and  two  of  the  union.  When 
the  Arbitration  Board  fails  to  reach  an  agreement,  then 
it  selects  a  neutral  party,  whose  decision  is  binding 
upon  both  sides. 


THE  UNION  IN  CONTROL  259 

While  any  dispute  is  in  process  of  adjustment,  there 
is  to  be  no  strike  or  "vacationing"  on  the  part  of  mem- 
bers of  the  union.  If  any  decision  is  made  that  the 
members  feel  they  cannot  accept,  they  must  appeal  their 
case  to  the  General  Executive  Board  of  the  Interna- 
tional. Under  no  circumstance  does  the  union  permit 
members  to  "take  the  bits  in  their  teeth." 

The  brewery  industry  was  not  a  highly  complicated 
one  like  the  clothing  industry.  The  problem  of  gov- 
ernment here  is  comparatively  simple.  But  what 
problems  the  brewing  industry  presented  to  labor  were 
pretty  thoroughly  covered  in  this  contract.  The  com- 
pany had  been  kept  busy  the  past  fifteen  years  fighting 
Prohibition,  and  had  had  neither  time  nor  money  left 
to  fight  the  union.  Labor  was  able  to  secure  those  con- 
ditions of  work  which  it  regards  its  just  due.  Here 
labor  comes  about  as  near  getting  what  it  says  it  wants 
as  anywhere  else  in  the  country. 

The  Brewery  Workers'  Union  is  one  of  the  best  dis- 
ciplined in  the  American  Federation  of  Labor.  It  can 
exact  and  does  exact  obedience  from  its  members  be- 
cause of  its  complete  control  of  employment  and  the  co- 
operation which  its  officials  get  from  the  companies. 
While  the  union  fought  Prohibition  to  save  the  indus- 
try, it  never  sacrificed  the  union  out  of  sympathy  for 
the  Brewers. 

The  sweep  of  Prohibition  the  past  decade  obliged 
brewers  in  one  locality  and  state  after  another  to  trans- 
form their  plants  and  make  a  different  product.  The 
erstwhile  Brewery  usually  began  making  soft  drinks, 
grape  juice,  yeast,  and  the  like.  So  the  union  re- 
quested the  American  Federation  of  Labor  to  extend 


26o  INDUSTRIAL  GOVERNMENT 

its  jurisdiction  to  these  new  industries.  The  Feder- 
ation did  it,  and  added  flour  mills  and  cold  storage 
plants.  No  matter  which  way  the  erstwhile  brewer 
turns  he  is  pretty  apt  to  find  the  same  old  union  facing 
him,  demanding  recognition  anew  and  the  same  condi- 
tions of  labor  that  held  under  the  old  brewery  regime. 

The  union  has  expanded  its  name.  It  is  now  called 
"The  United  Brewery,  Flour,  Cereal  and  Soft  Drink 
Workers  of  America."  Its  official  organ  carries  notices 
every  week  about  the  forming  of  new  locals  in  the 
recently  wet  states  as  well  as  in  such  states  as  Kansas 
and  Colorado,  where  Prohibition  has  been  enforced  for 
years.  They  are  unionizing  the  yeast  plants,  flour  and 
cereal  mills,  and  soft  drink  plants.  Although  the  union 
has  lost  in  membership  the  past  few  years,  it  is  making 
a  heroic  effort  to  win  back  its  former  strength. 

Prohibition  has  dashed  the  hopes  of  the  old  brewery 
worker.  He  is  a  class-conscious  worker,  a  believer  in 
the  social  revolution.  Like  his  fellow  comrades  he 
saw  society  divided  in  two  classes,  the  one,  the  possess- 
ing class  who  garnered  the  fat  and  honey  of  the  land 
without  toiling;  the  other,  his  class,  that  did  all  the 
work  but  possessed  none  of  the  tools  of  production. 
He  had  subscribed  to  the  declaration  that  "The  earth 
with  all  its  riches  belongs  to  all  men.  All  the  achieve- 
ments of  civilization  have  been  gained  by  the  work  of 
all  the  peoples  during  thousands  of  years.  The  results 
belong  to  all  in  common."  He  was  looking  forward  to 
that  great  day,  the  day  of  social  ownership  of  the 
means  of  life.  The  second  great  purpose  of  his  organi- 
zation was  to  see  that  the  Brewery  industry  was  social- 
ized along  with  the  others.  This  was  to  be  his  heritage, 
and  the  heritage  of  his  children.    But  alas!    Prohibi- 


THE  UNION  IN  CONTROL  261 

tion  has  thrown  a  monkey  wrench  into  the  hopper  of 
his  expectations.  He  must  begin  his  struggle  again; 
must  conquer  a  new  field.  And  he  isn't  sure  that  he 
may  not  be  thwarted  in  the  hour  of  victory. 


PART  II.     INFERENCES 

XIX 

THE  OPPORTUNITY  OF  MANAGEMENT 
John  R.  Commons 

We  do  not  convince  ourselves  that  the  eighteen  con- 
cerns which  we  have  described  are  typical  of  industry 
as  a  whole.  They  seem,  indeed,  to  be  successful,  with 
one  or  two  exceptions,  for  the  present,  along  new  lines. 
One  of  these  employers  said  that  25  per  cent,  another 
that  not  more  than  10  per  cent,  would  be  a  liberal  esti- 
mate of  the  proportion  of  employers  in  general  who 
were  alive  to  the  modern  labor  situation  and  were 
meeting  it  in  the  new  way  in  which  they  themselves 
were  trying. 

Our  conclusion,  therefore,  is  statistical.  From  10 
per  cent  to  25  per  cent  of  American  employers  may 
be  said  to  be  so  far  ahead  of  the  game  that  trade  unions 
cannot  reach  them.  Conditions  are  better,  wages  are 
better,  security  is  better,  than  unions  can  actually  de- 
liver to  their  members.  The  other  75  per  cent  to  90 
per  cent  are  backward,  either  on  account  of  inefficiency, 
competition,  or  greed,  and  only  the  big  stick  of  union- 
ism or  legislation  can  bring  them  up  to  the  level  of 
the  10  per  cent  or  25  per  cent. 

263 


264  INDUSTRIAL  GOVERNMENT 

We  see  the  process  going  on  continuously,  and  can 
compare  the  results  over  a  period  of  time.  Thirty 
years  ago  two  great  industries,  the  steel  industry  and 
the  newspaper  industry,  were  working  ii  to  12  hours 
daily,  seven  days  a  week.  In  the  steel  industry  union- 
ism was  defeated  at  the  Homestead  strike  of  1892.  In 
the  printing  industry  a  strong  organization  grew  up, 
based  on  the  closed  shop.  Now,  after  thirty  years, 
the  steel  corporation,  under  its  "open  shop"  banner, 
works  a  large  part  of  its  employees  11  to  12  hours  a 
day,  seven  days  a  week,  but  the  printing  industry  with 
its  "closed  shop"  works  them  only  44  to  48  hours  a 
week  (Chapters  XIV  and  XV),  In  the  steel  industry 
wages  go  up  and  down  like  the  prices  of  commodities 
determined  by  the  import  and  export  of  labor.  In  the 
printing  industry  wages  are  "standardized  and  stabil- 
ized" according  to  humane  principles,  and  the  printer 
earns  more  money  (in  terms  of  purchasing  power)  for 
8  hours  than  he  earned  for  12  hours'  work.  In  both 
industries  revolutionary  improvements  in  processes  of 
manufacture  have  been  introduced,  displacing  the  la- 
borers or  enlarging  their  product.  In  the  steel  industry 
the  results  of  those  improvements  go  only  into  profits 
for  the  owners  and  reduced  prices  for  the  consumers. 
In  the  printing  industry  the  improvements  have  made 
newspapers  cheaper  and  larger  for  consumers,  have 
increased  the  profits  of  the  owners,  and  have  shortened 
hours  and  raised  wages.  In  the  one  industry  only  the 
owners  and  the  public  participate  in  the  progress  of 
the  nation.  In  the  other,  the  owners,  the  public  and 
the  wage  earners  participate. 

With  such  a  contrast,  it  cannot  candidly  be  said 
that  the  "closed  shop"  with  its  restrictive  policies  in  the 


OPPORTUNITY  OF  MANAGEMENT    265 

printing  industry  has  been  disadvantageous  to  the 
nation,  and  that  the  "open  shop,"  with  its  unfettered 
policies  in  the  steel  industry,  has  been  advantageous  to 
the  nation  as  a  whole.  The  steel  corporation  has  kept 
ahead  of  the  game,  not  by  doing  better  than  the  unions 
can  do,  but  by  doing  worse,  and  doing  it  under  the 
name  of  liberty  and  the  open  shop.  We  did  not  make 
a  point  of  investigating,  in  this  trip  of  ours,  establish- 
ments that  keep  out  the  unions  by  doing  worse  than  the 
unions,  but  those  that  do  better  than  the  unions.  The 
open  shop  may  be  either  a  cloak  to  hide  long  hours, 
competitive  wages,  and  voiceless  workers,  or  it  may  be 
freedom  for  the  management  in  furnishing  reasonable 
hours  and  fair  wages  for  manly  workers.  We  tried 
to  find  the  latter  and  to  find  out  how  they  do  it. 

No  one  can  squarely  defend  all  of  the  restrictive 
policies  of  unions,  but  if  they  are  carefully  examined, 
as  we  have  tried  to  do,  they  will  be  found  to  be  not  so 
very  different  from  the  restrictive  policies  of  employ- 
ers and  of  non-unionists.  In  all  cases  these  policies 
have  their  source  in  the  knowledge  that  there  is  not,  at 
all  times,  enough  work  to  go  around,  which  is  but 
saying  there  are  not,  at  all  times,  enough  markets  to 
take  all  of  the  work  at  fair  wages  and  profitable  prices. 
In  the  summer  of  19 19  almost  every  establishment  in 
the  country  was  bending  its  energies  to  get  out  more 
product.  In  less  than  a  year  they  began  laying  off 
the  same  workers  because  they  were  getting  out  too 
much  product.  A  false  prosperity  in  19 19  produced 
by  fictitious  sales-prospects,  by  reckless  orders  from 
retailers  and  generous  credits  from  bankers,  was  fol- 
lowed in  1920  by  cancellation  of  orders,  withdrawal  of 
credits,  and  drop  in  prices.    The  workers  were  restrict- 


266  INDUSTRIAL  GOVERNMENT 

ing  output  in  1919  in  order  to  spread  out  the  work 
or  make  more  wages  out  of  the  apparent  prosperity — 
then  the  employers  were  restricting  output  in  1920  in 
order  to  keep  up  prices  in  the  evident  collapse.  In  one 
case  it  seemed  to  be  unjust — in  the  other  it  is  good 
business.  It  would  seem  that  what  is  needed  by  both 
is  "stabilization  and  standardization,"  and  one  of  our 
chapters  shows  how  this  is  being  attempted  on  a  na- 
tionar scale.     (Chapter  XV.) 

We  do  not  find  that  "labor"  wants  participation  in 
the  responsibilities  of  ownership  or  management.  At 
one  extreme  our  Chapters  XVI  and  XVII  show  an 
organization  of  labor,  strongly  socialistic,  which  has 
put  off  its  ideal  indefinitely  into  the  futrre,  because  its 
thousands  of  inexperienced  members  know  that  they 
are  not  ready,  and  have  launched  an  ambitious  program 
of  education  in  the  management  of  industry.  At  an- 
other extreme  our  Chapters  XIV  and  XV  show  an  or- 
ganization of  the  most  intelligent  workers  in  industry, 
some  of  whom  have  been  employers  and  failed,  and 
they  want  somebody  else  to  take  the  responsibility. 
Even  the  employers'  shop  unions  which  in  two  or  three 
cases  (Chapters  IX,  XI,  XIII)  have  gradually  taken 
over  a  large  participation  in  shop  management,  draw 
the  line  distinctly  at  the  point  of  financial  responsi- 
bility. 

In  fact,  the  whole  history  of  labor  organization 
shows  that  "labor,"  as  such,  cannot  manage  industry. 
The  older  unionists  have  learned  by  experience.  They 
have  seen  producer's  cooperation  tried.  While,  as  con- 
sumers, their  cooperatives  have  moderately  succeeded, 
and  while  there  have  been  successes  in  cooperative  mar- 
keting, yet  they  have  seen  the  laborers  always  lose  out 


OPPORTUNITY  OF  MANAGEMENT    267 

on  producers'  cooperation  whether  it  succeeded  or 
failed.  For,  when  their  producers'  cooperatives  suc- 
ceeded, the  members  closed  their  doors  to  new  members 
and  began  to  hire  wage-earners  on  the  market,  like 
other  capitalists,  and  eventually  went  over  to  the  em- 
ployers' side  of  the  game.  If  they  failed,  labor,  of 
course,  lost  out.  If  they  succeeded,  the  new  members 
knew  a  good  thing  too  well  to  let  in  anybody  that  came 
along.  Labor,  as  such,  is  made  up  of  young  laborers 
and  new  laborers  continually  coming  in,  without  ex- 
perience or  discipline.  It  is  even  immoral  to  hold  up 
to  this  miscellaneous  labor,  as  a  class,  the  hope  that 
it  can  ever  manage  industry.  Labor,  as  such,  in  control 
of  industry  breaks  down  on  discipline,  on  credit,  on 
depreciation  accounts,  on  planning  for  the  future,  on 
finding  managers  who  can  shoulder  responsibility.  But 
if  it  seems  to  succeed  on  these  points,  it  is  because 
certain  individuals  succeed,  and  then  those  individuals 
immediately  close  the  doors,  and  labor,  as  a  class, 
remains  where  it  was. 

What  we  find  that  labor  wants,  as  a  class,  is  wages, 
hours,  and  security,  without  financial  responsibility, 
but  with  power  enough  to  command  respect.  This  is 
seen  at  several  points.  Security  in  a  good  job  is  the 
very  heart  of  that  due  process  of  law  described  in 
Chapter  XVI,  Suspicion  of  absentee  owners,  who 
seem  to  take  no  responsibility  of  management,  yet  are 
there  where  they  can  take  off  the  surplus  earnings  in 
time  of  prosperity,  and  lay  off  the  workers  in  time  of 
adversity,  has  been  largely  removed  in  certain  estab- 
lishments (Chapters  I,  II,  IV,  V,  VI,  XII)  and  this 
explains  in  part  their  success.  The  failure  of  profit- 
sharing,  observed  in  Chapter  XII,  was  the  inability  of 


268  INDUSTRIAL  GOVERNMENT 

laborers  as  a  class  to  see  further  than  present  wages, 
and  hence  their  inability  to  share  in  the  management's 
present  responsibility  for  future  profit  and  loss. 

If  we  are  right  in  this,  that  what  labor  wants,  as  a 
class,  distinguished  from  what  individuals  want,  is 
nothing  more  than  security  in  a  good  job  with  power 
to  command  respect,  then  so  much  the  greater  is  the 
opportunity  and  responsibility  of  management.  Man- 
agement, then,  becomes  responsible,  not  only  to  the 
stockholders,  but  also  to  the  workers  and  the  nation. 

Modern  capitalism  has  been  built  up  on  security  of 
investments.  It  is  not  labor,  or  management,  or 
machinery  that  produces  wealth — it  is  the  credit  sys- 
tem, and  the  credit  system  is  nothing  but  confidence  in 
the  future.  Without  the  credit  system  there  might  be 
production  of  wealth,  but  it  would  be  the  hand-to- 
mouth  production  of  individuals  who  dare  not  trust 
their  products  out  of  their  own  hands,  and  society 
would  sink  back  into  feudalism  or  violence. 

But,  while  capitalism  is  based  on  security  of  invest- 
ment it  has  not  provided  security  of  the  job.  Modern 
socialism  is  but  a  reply  to  the  old  theories  of  political- 
economy  which  practically  assumed  that  everybody  was 
employed  all  the  time,  and  that  the  elasticity  which 
brought  this  about  was  the  rise  and  fall  of  prices  and 
wages  through  demand  and  supply.  Karl  Marx  re- 
plied that  the  elasticity  of  the  system  was  not  in  the 
law  of  demand  and  supply  but  in  "the  reserve  army  of 
the  unemployed."  But  he  concluded  that  capitalism 
could  not  cure  itself,  and  if  so,  there  was  nothing  left 
but  revolution  and  its  overthrow.  Socialism,  anarch- 
ism, and  trade  unionism,  all  have  their  source  in  this 
fear  of  unemployment  and  the  inability  of  capitalism 


OPPORTUNITY  OF  MANAGEMENT    269 

to  give  security  to  the  job  as  it  has  given  security  to 
the  investment.  They  are  wrong  in  so  far  as  they  con- 
clude that  by  destroying  security  of  investments  they 
can  obtain  security  of  jobs. 

They  are  wrong,  too,  in  so  far  as  they  conclude  that 
capitalism  cannot  cure  itself.  The  outstanding  fact 
of  our  investigation  is  the  importance  of  Management. 
Instead  of  capitalism  moving  on  like  a  blind  force  of 
nature,  as  Marx  thought,  here  we  see  it  moving  on 
by  the  will  of  management.  It  is  management  that 
attracts  capital  through  the  confidence  of  investors, 
for  the  bulk  of  investors,  like  the  bulk  of  laborers,  do 
not  want  and  cannot  manage  industry.  It  is  Manage- 
ment that  attracts  laborers,  but,  if  our  conclusions  are 
true,  seventy-five  to  ninety  per  cent  of  management 
attracts  labor,  not  by  confidence  in  the  future  but  by 
fear  of  unemployment.  So  when  "labor"  has  no  fear 
of  unemployment,  in  times  of  prosperity,  it  "lays 
down"  on  the  job,  and  when  it  fears  unemployment,  in 
hard  times,  its  so-called  "efficiency"  increases.  This 
is  a  curious  paradox.  In  good  times,  when  there  is  a 
shortage  of  products,  labor  enlarges  the  shortage  by 
working  slow,  but  in  hard  times  when  there  is  a  sur- 
plus of  products,  labor  enlarges  the  surplus  by  working 
hard.  This  is  not  good  business,  from  any  standpoint, 
and  it  is  because  management  has  not  learned  how  to 
utilize  hope  and  security  for  purposes  of  discipline  in 
place  of  fear  of  unemployment. 

That  it  can  learn  and  is  learning  may  be  seen  in 
our  chapters.  In  one  establishment '(Chapter  I)  the 
entire  policy  turns  on  getting  the  employees  to  think 
and  plan  for  the  future,  with  the  management.  In 
others  (Chapters  IV,  VI,  and  XIV)  a  good  record  has 


270  INDUSTRIAL  GOVERNMENT 

been  made  of  balancing  the  sales  department  with  the 
production  department,  so  that  no  man  is  laid  off 
in  dull  seasons  or  years.  In  another  (Chapter  XIII) 
absenteeism  on  account  of  sickness  has  been  reduced 
one-half  by  health  insurance.  In  other  establishments 
which  we  visited,  when  the  market  slumped  in  1920, 
the  shop  unions  of  employees  were  given  the  problem  of 
meeting  the  situation  and  met  it  by  laying  off  first 
those  who  were  willing,  then  those  without  families, 
then  shortening  the  hours  all  around  for  those  that 
remained.  One  firm  (Chapter  VI)  prepared  the  way 
in  the  profitable  years  of  the  war  and  after  by  setting 
aside  an  "employment  fund"  and  then  left  the  matter 
to  its  employees,  through  their  representatives,  to  dis- 
pose of  that  fund  and  to  enlarge  it.  In  another  (Chap- 
ter XII)  by  means  of  unemployment  reserves,  enabling 
them  to  stock  up  in  hard  times,  no  employee  has  been 
laid  off  in  twenty-five  years  through  lack  of  work. 
Others  have  set  up  old-age  pensions  (Chapters  XII  and 
XIII). 

On  the  whole  we  have  seen  enough,  in  these  estab- 
lishments and  others,  to  be  convinced  that  management 
can  provide  security  of  the  job  if  security  is  deemed 
important  enough.  It  is,  of  course,  not  a  simple  mat- 
ter to  work  out  the  details,  and  three-fourths  to  nine- 
tenths  of  employers  cannot  be  expected  to  do  it  with- 
out pressure.  That  pressure  was  brought,  in  the  case 
of  unemployment  through  accidents,  by  th?  workmen's 
compensation  laws.  Those  laws  are,  in  effect,  a  tax 
on  accidents,  which  can  be  evaded  by  preventing  acci- 
dents. And  accident-prevention  has  already,  within 
ten  years  after  the  first  laws,  become  a  big  feature  of 
American  capitalism,  with  its  well-paid  safety  experts. 


OPPORTUNITY  OF  MANAGEMENT    271 

Capitalists  have  even  set  about  the  education  of  the 
children  in  the  schools  and  the  education  of  the  public 
on  the  streets,  through  their  great  National  Safety 
Council,  with  the  Indirect  result  of  greatly  cutting  down 
accidents  in  the  factories.  In  fact,  capitalism.  In  the 
effort  to  cure  Itself  of  the  insecurity  of  accidents.  Is 
doing  more  than  politics,  trade  unions,  schools,  and 
all  the  rest  of  the  public  together  have  ever  been  able 
to  do.  It  is  simply  because  management,  by  the  pres- 
sure of  a  tax  on  accidents  that  penalizes  mismanage- 
ment, has  begun  to  feel  its  responsibility  to  the  work- 
ers and  the  nation. 

Likewise  It  may  be  expected  that  a  tax  on  absentee- 
ism through  sickness  and  a  tax  on  unemployment 
through  layoffs  will  bring  capitalism  as  a  whole  to  do 
what  the  establishments  we  visited  have  done,  in  re- 
ducing sickness  and  stabilizing  employment.  The  tax 
on  accidents  induces  Investors  to  let  the  management 
have  a  free  hand  In  preventing  accidents,  and  penal- 
izes management  that  does  not  prevent  accidents. 

So  with  the  tax  on  sickness  and  unemployment.  It 
induces  Investors  to  give  to  management  the  oppor- 
tunity to  do  what  management  has  begun  to  know  It 
ought  to  do,  prevent  absenteeism  through  sickness  and 
unemployment  through  turnover  and  layoff.  The  main 
purpose  of  accident,  sickness  and  unemployment  Insur- 
ance is  not  the  relief  of  the  Injured,  nor  the  relief  of 
sickness,  nor  philanthropic  benefits  for  the  unemployed, 
but  Is  the  business  purpose  of  preventing  unemploy- 
ment through  accidents,  sickness,  turnover  or  layoffs. 

The  concerns  that  we  visited  have  shown  that  it 
can  be  done, — and  the  only  question  is,  "Is  it  sufficiently 
important  to  require  all  the  others  to  do  it?"    If  it  is 


2^2  INDUSTRIAL  GOVERNMENT 

sufficiently  important  and  the  insurance  tax  is  suffi- 
ciently heavy  and  accurately  imposed,  then  capitalism 
will  find  the  way  to  do  it.  Capitalism  can  cure  itself, 
for  it  is  not  the  blind  force  that  socialists  supposed; 
and  not  the  helpless  plaything  of  demand  and  supply, 
but  it  is  Management.  And  the  greatest  self -cure  that 
it  needs  today  is  security  of  the  job,  for  it  is  the  inse- 
curity of  jobs  that  is  the  breeder  of  socialism,  of 
anarchism,  of  the  restrictions  of  trade-unionism,  and 
a  menace  to  capitalism,  the  nation,  and  even  civiHza- 
tion.  Our  chapters  have  shown  beginnings  in  this  self- 
cure  of  capitalism. 


XX 

PRINCIPLES  OF  MANAGEMENT 
Alfred  P.  Haake 

I.     WHAT   MANAGEMENT   IS  AND   INVOLVES 

Each  of  the  manufacturing  or  merchandising  con- 
cerns discussed  in  the  chapters  of  this  book  is  an 
industrial  unit,  a  going  concern.  Together  with  all 
the  others  in  all  branches  of  making  and  marketing,  it 
constitutes  the  industrial  world. 

Each  of  these  concerns  is  made  up  of  representa- 
tives of  the  several  factors  in  production — labor,  ma- 
terials or  capital,  the  forces  of  nature,  land,  and  man- 
agement. It  is  an  organic  unit,  primarily  a  psychic 
unit,  for  its  principal  parts  are  human  beings  co- 
operating in  the  use  of  materials  and  forces. 

But  men  do  not  automatically  combine  themselves 
in  organizations  for  the  purpose  of  production.  The 
great  majority  of  mankind  is  strongly  disinclined  to 
take  the  initiative  in  thinking  and  planning.  Most 
men  prefer  to  follow  the  plans  and  directions  laid 
down  by  the  thinkers.  It  is  so  much  easier.  Imagina- 
tion, constructive  and  foresighted  thinking,  is  scarce, 
and  because  of  its  scarcity  the  price  paid  for  it  is 
usually  high. 

Some  inducement  must  be  offered  to  secure  the  ex- 

273 


274  INDUSTRIAL  GOVERNMENT 

penditure  of  any  effort.  Bill  Jones  and  his  fellows 
work  because  they  have  to  work  to  get  what  they  want. 
Charlie  Smith  and  others  like  him  must  see  the  pros- 
pect of  some  reward  before  they  will  deny  themselves 
the  full  satisfaction  of  their  wants,  a  denial  which  is 
necessary  if  capital  is  to  be  saved.  They  must  be  paid 
to  let  others  have  the  use  of  their  savings.  Likewise 
with  the  owners  of  land  and  natural  resources. 

We  express  and  measure  values  in  terms  of  money, 
and  since  the  possession  of  money  carries  with  it  power 
over  goods,  payment  for  services  in  production  can 
most  easily  be  made  in  terms  of  money.  This  results 
in  wages,  interest,  rent  and  profits. 

It  takes  the  combined  efforts  of  Bill  Jones,  Charlie 
Smith  and  many  others  to  produce  the  goods  which  we 
need.  It  is  generally  accepted  that  to  each  belongs  that 
which  he  produces,  but  it  is  next  to  impossible  to  deter- 
mine just  what  that  share  amounts  to.  It  would  sim- 
plify many  troublesome  questions  if  everybody  could 
agree  on  just  how  much  each  person  ought  to  get,  but 
Bill  Jones  has  one  idea,  Charlie  Smith  has  a  different 
notion,  the  man  who  hires  Bill  Jones  to  work  for  him 
has  still  another  notion.  Here  is  the  root  of  most  of 
our  industrial  troubles  :  there  is  a  never  ending  struggle 
to  decide  just  how  much  each  of  the  parties  produces 
and  ought  to  get.  There  is  no  absolute  standard,  and 
whatever  scheme  or  basis  of  division  an  effective  ma- 
jority of  men  believe  to  be  right  will  work.  When 
they  change  their  minds  other  arrangements  must  be 
made. 

Industrial  effort  is  the  carrying  into  effect  of  some 
idea.  Henry  Ford  had  an  idea,  making  a  standardized 
car  in  such  quantities  that  the  price  could  be  low  enough 


PRINCIPLES  OF  MANAGEMENT       275 

to  fit  the  purse  of  the  great  class  of  persons  of  moder- 
ate income.  The  result  is  one  of  the  greatest  and  most 
profitable  industrial  units  the  world  has  ever  seen. 

Some  one  must  conceive  the  idea,  or  select  it  from 
ideas  presented  to  or  available  to  him.  Some  one  must 
plan  for  carrying  the  idea  into  effect.  This  is  the 
role  of  the  promoter,  a  function  today  assumed  by  the 
banker  or  financier.  By  granting  or  denying  the  use 
of  funds  in  the  launching  or  support  of  some  enter- 
prise he  effectively  determines  which  ideas  shall  be 
carried  into  action. 

But  this  is  only  the  first  step.  The  next  thing  is  to 
secure  the  active  and  continued  cooperation  of  labor, 
capital  and  land,  the  agencies  in  production.  This  goes 
beyond  the  role  of  the  pure  promoter,  and  marks  the 
role  of  active  management.  This  is  government,  and  it 
is  active  management  which  constitutes  the  government 
of  the  going  concern. 

The  role  of  management  then  includes  the  following: 

1.  The  selection  of  the  idea; 

2.  The  determination  of  the  feasibility  of  the  idea; 

3.  The  selection  of  factors  necessary  to  effect  the  idea; 

4.  The  combination  of  these  non-automatic  factors  into 
a   well-proportioned  organic  unit,   the  business; 

5.  The  securing  of  the  active  and  continued  cooperation 
of  these  non-automatic  factors. 

These  five  functions  fall  into  three  broad  groups : 

1.  The  idea  or  purpose  (i  and  2); 

2.  Organization  (3  and  4) ; 

3.  Administration  (5). 

Promotion  is  concerned  primarily  with  the  idea  and 
the  selection  of  the  active  management.    Organization 


276  INDUSTRIAL  GOVERNMENT 

and  administration  are  the  tasks  with  which  active 
management  concerns  itself,  although  it  may  also  from 
time  to  time  modify  the  purpose  of  the  business. 

This  is  the  task  and  function  of  management.  It 
is  the  organization  and  administration  of  an  organic 
unit,  a  going  concern.  The  conventional  point  of 
view  considers  the  owner  and  officers  the  higher  execu- 
tives only,  as  constituting  this  management.  But  this 
view  is  inadequate.  Authority  must  be  distributed 
from  its  source,  and  filters  down  through  delegation  of 
power  to  all  parts  of  the  business  organization. 

The  business  unit  is  a  number  of  human  beings,  co- 
operating in  the  use  of  materials  and  of  human  and 
natural  forces,  under  the  direction  of  a  dominant  will, 
toward  the  consummation  of  a  common  end.  They 
are  held  together  by  the  cohesive  forces  of  responsi- 
bility and  mutual  risk. 

As  a  unit  these  human  agents  are  engaged  in  pro- 
ducing value ;  use-value  from  the  point  of  view  of  their 
customers,  exchange-value  from  their  own  point  of 
view.  It  is  because  they  want  a  universal  purchasing 
power,  money,  which  they  can  exchange  for  such  goods 
as  they  want  but  do  not  themselves  produce,  that  they 
are  willing  to  help  in  the  production  of  use-value  which 
will  be  sold  to  others  who  are  willing  and  able  to  pay 
for  it. 

The  purchasing  power,  money,  which  they  secure 
is  in  turn  distributed  among  the  several  factors  pro- 
ducing the  product.  It  constitutes  both  remuneration 
for  their  services  and  incentive  for  their  participation 
and  cooperation  in  production. 

Central  in  this  business  unit  stands  management.  It 
secures  and  accepts  the  services  of  labor.     It  is  re- 


PRINCIPLES  OF  MANAGEMENT       277 

sponsible  to  labor  for  the  advances  of  creative  effort. 
It  is  in  the  position  of  both  employer  and  employee  of 
labor:  an  employer  because  it  hires  Bill  Jones  and  his 
fellow  workers,  an  employee  because  it  assumes  the 
task  of  guiding  and  coordinating  the  efforts  of  work- 
ers, because  it  assumes  the  responsibility  of  safeguard- 
ing the  investment  of  labor. 

Management  is  likewise  responsible  to  land  and 
natural  resources :  that  is,  to  society  which  has  a  vested 
interest  in  the  gifts  of  nature.  It  is  the  task  of  man- 
agement to  employ  effectively  these  natural  agents  and 
yet  conserve  them  for  the  continued  use  of  future  gen- 
erations. This  is  particularly  apparent  in  the  oil 
industry.  So  far  as  we  know,  the  supply  of  oil  pools 
beneath  the  surface  of  the  earth  is  limited,  and  a 
wasteful  exploitation  of  these  resources  now  would  in- 
jure society  by  unduly  curtailing  the  future's  available 
supply. 

It  is  more  easily  appreciated  that  management  is 
the  employee  of  capital.  With  the  development  of  the 
Domestic  System  of  industry,  followed  by  the  Factory 
System,  management  and  the  ownership  of  capital  have 
usually  been  vested  in  the  same  persons.  But  today, 
the  active  administration  of  industry  is  not  always  in 
the  hands  of  the  owning  capitalist;  he  simply  hires 
the  management  as  he  hires  other  employees.  He 
places  his  capital  in  the  hands  of  management  just  as 
management  places  tools  and  machinery  at  the  dis- 
posal of  workmen,  and  naturally  tries  to  hire  the  man- 
agement which  will  make  the  best  use  of  his  capital, 
pay  him  big  dividends  and  keep  his  capital  safe.  This 
means  that  the  most  efficient  management  usually  gets 
the  biggest  opportunities. 


278  INDUSTRIAL  GOVERNMENT 

Just  as  skill  in  craftsmanship  once  relinquished  its 
control  over  industry  to  the  possessor  of  capital,  whose 
chief  qualification  for  control  consisted  in  bargaining 
ability  and  the  sheer  possession  of  capital,  so  the  pos- 
session of  capital  shows  signs  of  giving  up  its  control 
of  industry  to  the  possessor  of  managerial  ability,  ca- 
pacity for  performing  the  five  functions  summarized 
earlier  in  the  chapter.  There  is,  however,  a  strong 
counter  tendency  for  the  great  banking  and  financial 
interests  of  the  country  to  gain  control  of  industry 
through  the  purchase  of  controlling  shares  of  stock  and 
majority  interest.  Specially  qualified  managers  are 
placed  in  charge  of  the  industries  thus  acquired.  In 
one  of  the  plants  visited,  we  met  a  gentleman  who  has 
shown  peculiar  aptitude  in  the  picking  and  handling 
of  men.  He  is  employed  by  a  syndicate  of  financiers 
to  bring  back  to  a  paying  basis  plants  over  which  they 
have  acquired  control.  This  is  but  one  of  a  growing 
number  of  examples. 

It  is  true,  then,  in  a  real  sense,  that  management  is 
responsible  to  capital.  Even  though  capital  does  not 
closely  supervise  the  activities  of  management  it  can 
always  discharge  an  inefficient  management,  as  it 
usually  does,  and  set  abler  management  in  its  place — 
just  as  workmen  are  fired  and  hired.  But  we  must 
make  a  distinction  in  the  kind  and  degree  of  respon- 
sibility. 

Whether  the  enterprise  be  a  corporation,  or  partner- 
ship or  individually  owned,  its  capital  will  be  of  two 
kinds.  There  is  invested  capital  from  the  point  of 
view  of  the  management,  and  borrowed  capital  from 
the  same  point  of  view.  The  first  is  represented  by 
stock  and  reinvested  earnings;  the  latter  by  bonds, 


PRINCIPLES  OF  MANAGEMENT       279 

loans  from  banks  and  credit  advances  by  supply  houses. 
The  borrowed  capital  stands  in  relation  of  creditor  to 
the  business,  having  a  prior  claim  on  both  earnings  and 
assets.  Its  returns  are  guaranteed  and  the  rate  fixed 
in  advance;  but,  except  in  case  of  failure  to  receive 
interest,  has  no  control  over  the  business.  It  is  bor- 
rowed; its  services  are  hired.  It  stands  in  relation  of 
employee  to  the  management,  its  remuneration  coming 
in  the  form  of  interest. 

The  holder  of  preferred  stock,  while  legally  an 
owner  of  the  enterprise,  is  actually,  from  the  stand- 
point of  management,  in  the  same  relation  as  the  bond- 
holder, since  he  is  assured,  not  management,  but  lim- 
ited profits. 

It  is  the  common  stock,  with  neither  guaranteed  nor 
assured  return,  which  carries  control  of  the  enterprise 
through  its  voting  power.  Sometimes  it  represents  an 
actual  initial  investment,  often  it  is  simply  a  bonus 
given  by  promoters  to  themselves  for  their  services  in 
organizing  or  to  the  initial  purchasers  of  preferred 
stock,  as  a  capitalization  of  anticipated  future  earnings. 
Carrying  voting  power,  this  common  stock  confers 
upon  its  owners  a  control  similar  to  that  conferred  by 
the  actual  investments  of  partners  or  individual  busi- 
ness men.  Possession  of  it  gives  control  over  manage- 
ment. It  is  the  agency  through  which  the  dominant 
will  in  the  enterprise  finds  expression.  It  takes  what  is 
left  after  all  the  obligations  of  the  business  to  its 
creditors  have  been  discharged.  Each  of  these  factors, 
labor,  nature,  capital  and  management,  contributes  to 
the  creation  of  value :  each  takes  a  risk  in  the  venture. 
The  difference  is  in  the  kind  and  degree  of  risk. 

Labor  contributes  human  services,  investing  them 


28o  INDUSTRIAL  GOVERNMENT 

much  as  the  capitalist  invests  his  money  although 
usually  under  disadvantages  to  which  capital  does  not 
have  to  submit :  the  person  of  labor  is  inseparable  from 
its  investments, — it  is  perishable  and  ,its  supply  cannot 
be  withheld  from  the  market  awaiting  more  favorable 
conditions,  as  capital  can.  Labor  risks  its  well-being 
in  employment  as  well  as  alternative  opportunities  for 
employment.  Money  wages  are  the  measure  of  the 
value  of  those  services  and  a  payment  for  that  risk. 

The  money  furnished  by  the  capitalist, — for  every 
lender  of  funds,  large  or  small,  is  a  capitalist — buys 
the  materials  and  equipment  for  making  possible  and 
increasing  the  effectiveness  of  human  effort,  as  well  as 
providing  the  means  of  paying  for  the  services  of  labor. 
Therefore  the  risk  of  its  being  used  up  and  not  re- 
placed. Its  owner  must  go  without  those  things  his 
money  otherwise  would  buy  for  him.  Its  owner  re- 
ceives, or  should  receive,  a  payment  sufficient  to  com- 
pensate for  the  sacrifices  necessary  to  saving  and  to 
encourage  the  saving  of  additional  capital. 

Nature  contributes  forces  and  materials  in  the  raw 
state.  Nature  asks  no  pay  for  services  and  materials 
rendered,  but  society  has  a  vested  interest  in  the  con- 
servation of  natural  resources  for  future  generations. 
It  is  entitled  to  a  respectful  consideration  of  that  vested 
interest. 

Management,  through  a  selection  and  combination 
of  the  several  factors,  proceeding  in  accordance  with 
the  law  of  division  of  labor  and  specialized  effort, 
makes  them  all  more  effective  than  they  would  other- 
wise be.  The  total  value  created  is  greater  because  of 
the  control  by  management.  Management  accepts  or 
takes  the  contributions  of  the  several  factors  and  as- 


PRINCIPLES  OF  MANAGEMENT        281 

sumes  the  responsibility  for  their  effective  combination 
and  direction,  for  their  most  complete  utilization.  Out 
of  the  surplus  value  thus  created  it  takes  its  reward. 
If  management  has  been  efficient,  its  product  is  great, 
and  the  fund  for  its  remuneration,  considerable.  If 
not,  the  reverse  is  true. 

MANAGEMENT    AND   EARNINGS 

We  may  say,  then,  that  the  effectiveness  of  manage- 
ment is  reflected  in  the  net  earnings  of  an  enterprise. 
Where  common  stock  has  been  issued,  its  market  value 
becomes  the  capitalization  of  those  net  earnings.  It 
is  true  that  the  vast  majority  of  common  stock  is  held 
by  individuals  who  are  not  responsible  for  the  growth 
in  net  earnings  but  who  are  in  a  position  to  appropriate 
those  earnings  because  in  one  way  or  another  they 
have  secured  possession  of  the  common  stock.  In  all 
justice  it  seems  that  tne  earnings  should  go  to  those 
who  have  produced  them,  and  once  the  period  of  initial 
risk  has  been  passed,  all  that  the  holder  of  common 
stock,  who  is  not  a  part  of  the  active  management,  is 
entitled  to,  is  a  fair  return  on  his  investment  in  ac- 
cordance with  the  risk.  The  only  real  managerial 
function  he  exercises  is  the  right  to  discharge  inefficient 
management  through  the  board  of  directors,  a  rather 
doubtful  managerial  activity  in  most  cases.  The  com- 
mon stockholder,  as  such,  exercises  no  functions  of 
active  management.  In  other  words,  the  absentee  com.- 
mon  stockholder  should  occupy  the  same  position  in 
respect  to  the  enterprise  as  is  occupied  by  the  holder 
of  bonds  or  preferred  stock  with  difference  in  rate  of 
return  due  to  relative  priority  and  the  risks  taken. 


282  INDUSTRIAL  GOVERNMENT 

Common   stock  literally  should  represent  capitalized 
managerial  ability. 

WHO   IS   THE   MANAGEMENT? 

The  pertinent  question  is, "Who  is  the  management?" 
Is  it  the  initiator  who  has  the  idea  and  secures  with  his 
money  the  participation  of  the  several  factors,  includ- 
ing the  person  in  active  control  of  the  enterprise,  or  is 
it  the  person  in  active  and  actual  control  of  the  enter- 
prise? Again,  is  labor,  in  that  it  exercises  discretion- 
ary power  and  uses  judgment  in  planning,  as  well  as 
efifort  in  executing,  also  a  part  of  the  management? 

The  answer  is,  any  one  of  these  or  all,  depending 
upon  which  assumes  and  performs  the  duties  of  active 
organization  and  administration.  The  absentee  stock- 
holder who  does  nothing  more  than  risk  his  money, 
strictly  speaking,  is  not  part  of  the  management,  al- 
though he  does  participate  in  an  initial  step  in 
management  by  making  the  advances  of  funds  and 
selecting  the  management,  which  are  necessary  to  get 
the  business  started.  But  his  contribution  is  not  a 
part  of  active  management.  On  the  other  hand,  if 
after  having  furnished  the  idea  and  the  funds  or  se- 
cured both,  he  also  selects  and  supervises  the  activities 
of  management,  we  may  properly  designate  him  as 
management.  Andrew  Carnegie  showed  himself  a 
genius  in  the  selection  and  handling  of  subordinates. 
In  selecting  the  type  of  man  whom  he  placed  in  charge 
of  the  various  enterprises  in  which  he  interested  him- 
self, he  exercised  a  profound  influence  over  each  of 
these  enterprises.  Had  he  selected  someone  else  than 
Mr.  Schwab  to  be  placed  in  charge  of  the  Carnegie 
Steel  Works,  it  is  doubtful  whether  that  concern  would 


PRINCIPLES  OF  MANAGEMENT       283 

have  developed  to  the  proportions  which  it  reached. 
He  offered  high  salaries  and  was  generous  in  sharing 
profits  with  his  managers,  leaving  a  trail  of  new  million- 
aires in  his  wake,  but  if  his  labors  as  a  manager  had 
stopped  with  the  selection  of  the  men  and  the  offering 
of  these  inducements,  in  other  words,  if  he  had  exerted 
no  influence  in  the  determination  and  administration 
of  the  policies  which  were  subsequently  adopted,  he 
would  have  fallen  short  of  the  stature  of  true  manager. 

Those  individuals  constitute  the  true  management 
who  through  the  exercise  of  observation  and  creative 
imagination  maintain  the  requisite  proportioning  of 
effort  within  a  going  concern,  whether  in  the  position 
of  stockholder  they  themselves  assume  the  residual 
risk  of  the  enterprise  or  are  simply  employed  by  those 
who  as  stockholders  do  assume  this  risk. 

As  we  go  down  from  level  to  level  within  a  going 
concern,  we  find  a  distribution  and  delegation  of  mana- 
gerial authority.  This  reaches  even  to  the  person  of 
a  foreman,  who,  while  often  not  considered  a  part 
of  the  management,  does,  nevertheless,  exercise  judg- 
ment and  discretionary  power  in  the  planning  of  work. 
He  assumes  the  responsibility  for  the  carrying  out  of 
plans,  he  has  authority  over  others  who  execute  his 
orders,  and  to  that  extent  is  a  part  of  management. 
We  may  state  it  as  a  principle,  then,  that  management 
includes  all  those  who  accept  responsibility  for  the 
making  and  carrying  out  of  plans,  and  definitely  ex- 
clude from  the  category  of  management  only  those  per- 
sons who  are  accountable  solely  for  the  carrying  out  of. 
plans  and  the  execution  of  orders  from  above  without 
any  power  of  discretion  as  to  the  time,  place,  and 
manner  in  which  these  plans  shall  be  carried  out  or 


284  INDUSTRIAL  GOVERNMENT 

orders  executed.  The  foreman  is  a  part  of  manage- 
ment— the  skilled  and  unskilled  workmen  who  have  no 
authority  over  their  fellows  are  not. 

THE    PRINCIPLES   OF    CONTROL 

Active  management,  as  we  have  shown,  is  primarily 
concerned  with  organization  and  administration  of  the 
going  concern.  This  means  control.  The  going  con- 
cern is  an  organization,  each  of  whose  various  parts 
has  its  appropriate  function.  If  it  is  to  function  effi- 
ciently, that  is,  if  it  is  to  effect  its  purpose  with  a 
minimum  of  energy  outlay,  its  management  must  ob- 
serve certain  principles  of  control. 

The  first  principle  is  that  of  individual  initiative; 
each  part  must  be  capable  of  initiating  its  own  efforts. 
The  energy  that  is  necessary  in  handling  an  oar  in  a 
boat  race  must  come  from  the  person  handling  the  oar 
as  a  part  of  the  crew,  a  going  concern ;  he,  the  individ- 
ual oarsman,  must  initiate  the  effort.  The  individual 
workman,  who  as  such  is  only  one  part  of  the  business, 
or  going  concern,  must  of  his  own  initiative  perform 
the  duties  that  are  necessary  in  the  carrying  out  of  an 
order.  If  at  any  point  this  is  not  the  case,  then  at 
that  point  the  organization  breaks  down.  One  of 
the  problems  oT  management  is  the  securing  of  volun- 
tary initiative  of  the  individuals  constituting  the  busi- 
ness unit. 

The  second  principle  is  that  of  balance.  There  must 
be  accurate  proportioning  of  capacity  throughout  the 
organization.  No  one  part  may  be  of  such  proportions 
that  its  active  functioning  produces  more  than  another 
part  can  handle.  In  the  Plimpton  Press  (Chapter 
XIV)  the  management  has  worked  out  a  balance  be- 


PRINCIPLES  OF  MANAGEMENT       285 

tween  the  sales  and  production  departme.its.  The  pro- 
ductive capacity  of  the  plant  for  a  period  is  determined, 
and  such  a  sales  force  employed  as  can  market  the 
possible  product.  This  is  a  static  concept,  however, 
and  applies  to  capacities  of  individuals  rather  than  to 
their  active  cooperation. 

The  third  principle  is  that  of  coordination.  Assum- 
ing that  each  part  functions  on  its  own  initiative  and 
that  the  requisite  number  of  units  has  been  provided 
for  the  several  parts,  there  still  remains  the  necessity 
of  so  determining  the  relationship  of  the  various  parts 
or  activities  that  the  work  will  flow  smoothly  from  one 
to  another  without  undue  speed  or  friction,  and  that 
there  is  such  a  timing  of  operations  that  each  part  is 
functioning  at  its  full  capacity  at  all  times.  The  Den- 
nison  Company  (Chapter  VI)  arranges  and  trains  its 
sales  force  to  secure  orders  for  the  kind  of  product 
which  the  factory  can  most  effectively  produce  at  a 
particular  time,  and  to  educate  the  trade  to  order  dif- 
ferent varieties  of  goods  at  such  seasons  of  the  year  as 
will  permit  of  the  steady  operation  of  the  factory. 
Thus  the  trade  was  induced  to  order  jewelry  boxes 
early  in  the  year  instead  of  just  before  the  retail  sea- 
son, which  enabled  the  management  to  keep  the  factory 
employed  on  these  articles  at  a  time  when  work  would 
be  slack.  This  is  the  dynamic  aspect  of  balance,  the 
property  adjusted  capacities  coordinated  in  action. 
With  these  principles  realized,  management  has  made 
the  going  concern  into  an  efficient  organization  . 

HUMAN   RELATIONSHIP    PRINCIPLES 

The  principles  of  individual  initiative,  balance,  and 
coordination  may  be  said  to  be  only  the  mechanical 


286  INDUSTRIAL  GOVERNMENT 

aspect  of  control.  They  do  result  in  an  efficient  or- 
ganization but  do  not  explain  why  or  how  men  can 
be  fitted  into  such  an  organization.  They  leave  un- 
touched the  question  of  how  the  organization  can  be 
maintained  at  this  high  level  of  efficiency.  It  is  easy 
enough  to  control  and  maintain  equipment,  but  not  so 
with  men.  The  workman  may  put  forth  great  efforts 
today,  he  may  work  with  interest  and  enthusiasm,  and 
tomorrow  be  sluggish  or  ill-disposed.  He  is  a  human 
being  with  likes  and  dislikes,  sensitive  or  dull,  gener- 
ous or  selfish,  open-minded  or  prejudiced,  any  number 
of  combinations  and  variations  of  these  and  other 
qualities — he  is  governed  by  emotions.  It  is  necessary 
for  management  to  observe  closely  and  carefully  the 
principles  of  control.  From  this  point  of  view  they  are 
responsibility,  mutual  risk  assumption,  and  induce- 
ment. 

A.     Responsibility. 

To  the  extent  that  a  worker  accepts  responsibility 
for  the  performance  of  a  task,  individual  initiative  will 
be  forthcoming,  he  will  hold  himself  accountable  for 
the  necessary  expenditure  of  effort.  If  the  power  of 
discretion  as  to  the  manner  of  performance  of  the  work 
accompanies  the  delegation  and  acceptance  of  respon- 
sibility, the  worker  becomes  a  part  of  the  management 
to  that  extent.  In  that  type  of  management  where  we 
find  one  man  control — that  is,  the  executive  assuming 
all  responsibility  for  planning  and  delegation  of  work 
and,  on  the  part  of  his  employees,  not  more  than  an  obe- 
dient acceptance  and  carrying  out  of  orders  with  an  ab- 
sence of  discretionary  power — this  principle  is  not  in 


PRINCIPLES  OF  MANAGEMENT       287 

use  and  management,  limited  in  the  extent  of  its  per- 
sonnel, must  depend  for  effectiveness  upon  its  personal 
driving  qualities.  In  this  type  of  management  we  find 
the  executive  overloaded  with  work,  wearing  himself 
out,  and  the  organization  under  him  either  consisting 
of  hero-worshippers  almost  blindly  following  his  lead 
or,  often,  sullenly  performing  its  tasks,  not  because  of 
genuine  loyalty  to  the  management  but  because  there  is 
fear  of  discharge  and  no  alternative  employment.  It  is 
when  the  worker  looks  upon  himself  as  a  part  of  the 
business,  one  of  the  management,  that  his  greatest 
interest  can  be  aroused.  He  is  helped  to  see  that  his 
interests  and  those  of  the  management,  instead  of 
being  opposed,  are  really  in  common, 

A  splendid  example  of  an  effective  use  of  this  prin- 
ciple is  found  in  the  Nunn,  Bush  &  Weldon  Shoe  Com- 
pany (Chapter  XI).  This  concern  has  deliberately 
placed  the  responsibility  for  the  conduct  of  its  em- 
ployees in  their  own  hands.  It  has  gone  so  far  as  to 
delegate  to  them  the  power  of  fixing  wages  and  hours 
of  work  and  the  right  to  discharge.  And  the  significant 
thing  is  that  the  employees,  instead  of  running  wild 
with  the  authority  given  them,  have  actually  been  so- 
bered. They  look  upon  themselves  as  business  men 
interested  in  the  welfare  of  the  concern  which  employs 
them,  being  careful  not  to  go  so  far  in  their  demands 
that  the  concern  is  unable  to  compete  effectively  with 
other  manufacturers  of  shoes.  The  same  principle  has 
been  applied  at  Filenes  (Chapter  V). 

B.     Risk  Assumption. 

Closely  allied  to  this  principle  is  that  of  risk  assump- 
tion.    Labor  is  an  investor,  and  if  the  employee  can 


288  INDUSTRIAL  GOVERNMENT 

be  brought  to  see  that  he  takes  an  actual  risk  in  de- 
voting himself  to  the  services  of  his  company  and  that 
he  can  make  the  investment  of  his  labor  more  or  less 
secure  according  to  the  kind  and  degree  of  interest 
he  takes  in  his  work,  he  is  far  more  likely  to  function 
efifectively  on  his  own  initiative.  It  will  not  be  neces- 
sary to  drive  him. 

This  is  the  philosophy  which  lies  back  of  all  profit- 
sharing  schemes.  The  management  wants  more  pro- 
duction. It  can  afiford  to  pay  a  share  of  the  increased 
product  to  the  workers  because  their  increased  activ- 
ity, distributing  the  overhead  or  fixed  charges  over  a 
larger  number  of  units,  lowers  the  unit  cost  of  the 
product.  A  portion  of  this  saving  is  held  out  to  the 
workers  as  inducement  for  greater  production.  They 
call  it  profit  sharing  because  they  want  the  men  to 
believe  that  they  will  get  back  at  least  a  portion  of  the 
surplus  net  value  produced.  They  are  teaching  the 
men  to  visualize  the  effects  of  increased  industry  and 
loyalty,  to  see  a  connection  between  work,  production 
and  the  pay  envelope.  In  effect  this  means  that  the 
workers  are  brought  to  see  that  they  are  joint-sharers 
in  a  business  venture,  risking  their  labor  now  in  order 
that  they  may  secure  returns  in  the  near  future;  that 
they  are  in  a  position  to  influence  the  degree  of  returns 
by  their  individual  industry  and  team  work. 

The  men  do  not  always  respond  to  the  teaching. 
They  see  wages  as  a  payment  for  services  sold,  not 
invested.  All  too  often  they  look  upon  the  shared 
profits  as  nothing  more  than  belated  wages,  arguing 
that  if  the  management  can  afford  to  pay  profits  at  a 
later  time  it  can  do  so  only  because  it  has  withheld  a 


PRINCIPLES  OF  MANAGEMENT       289 

part  of  their  wages  previously.  The  men  prefer  to 
receive  their  wages  from  week  to  week  instead  of 
letting  the  management  have  use  of  their  money,  for 
its  own  advantage  as  they  see  it.  Thus  they  fail  to 
see  any  causal  relation  between  variations  of  their 
efforts  and  fluctuations  in  dividends.  This  is  primarily 
why  profit-sharing  schemes  fail.  If  management  would 
first  educate  the  worker  to  realize  his  risk-taking  func- 
tion, and  then  suggest,  or  better  still,  let  him  suggest, 
the  sharing  of  profits;  instead  of  using  the  profit-shar- 
ing scheme  to  effect  that  education,  it  is  likely  that  the 
sharing  of  profits  would  in  many  cases  succeed  where 
the  method  now  fails. 

C.     Inducement. 

Thirdly,  and  fundamentally,  inducements  are  neces- 
sary to  secure  an  active  cooperation  of  the  several  fac- 
tors. The  bestowing  of  responsibility  together  with 
discretionary  power  upon  the  workman  often  proves 
to  be  the  most  effective  inducement,  for  in  that  bestowal 
the  worker  sees  possibility  of  future  returns.  This 
means  more  than  monetary  returns,  since,  as  men  rise 
to  higher  levels  of  achievement,  opportunities  for 
power  and  the  sheer  gratification  of  capacities  make 
work  more  attractive;  mere  money  is  not  the  sole  in- 
ducement. But,  in  the  last  analysis,  men  work  not 
because  they  want  to,  but  because  they  have  to,  in  order 
to  get  the  things  which  the  money  they  secure  will 
buy  for  them.  If  wants  are  few,  that  is,  if  the  scale 
of  living  for  the  worker  is  low,  and  if  he  is  not  de- 
sirous of  raising  it,  he  will  not  respond  so  readily  to 
financial  inducement.     The  hope  for  management  at 


290  INDUSTRIAL  GOVERNMENT 

this  point  rests  on  the  truth  that  human  wants  are  not 
easily  satiated  and  have  a  way  of  expanding  as  rap- 
idly as  they  are  gratified.  For  most  men,  money  is 
the  most  highly  desired  single  thing,  because  it  can 
buy  almost  anything  the  average  man  wants. 

It  is  this  principle  which  Joseph  and  Feiss  (Chapter 
IV)  use  so  effectively.  Through  the  several  bonuses 
which  they  hold  out  to  the  workers  they  offer  the  pos- 
sibility of  increasing  income.  The  increased  income 
depends  upon  increased  quantity  and  improved  quality 
of  the  output.  The  piece  rate  and  production  bonus 
encourage  the  worker  to  accept  the  responsibility  for 
getting  out  the  requisite  quantity.  The  quality  bonus 
operates  almost  automatically  to  keep  the  quality  up. 
The  worker,  or  operative,  is  encouraged  to  see  the  di- 
rect relationship  between  the  amount  and  kind  of  work 
and  the  contents  of  his  pay  envelope.  Individual  initia- 
tive is  thus  secured.  Through  the  scientific  analyzing 
of  process,  motion,  and  time  study,  the  correct  assign- 
ing of  work  and.the  proportioning  of  the  various  parts, 
balance  is  achieved.  Careful  planning  of  work  and 
close  watch  of  the  reaction  of  workers  to  the  various 
inducements  effects  coordination. 

Teamwork  is  simply  an  everyday  term  for  the  con- 
dition existing  when  each  worker  accepts  his  respon- 
sibility, meets  his  accountability,  understands  his 
relation  to  the  risks  involved  in  the  enterprise,  and 
finds  the  inducements  adequate.  The  securing  of  team- 
work constitutes  administration  of  the  business.  It  is 
likely  to  follow  intelligent  delegation  of  managerial, 
or  planning  and  supervising  functions  down  through 
the  personnel  of  the  organization. 


PRINCIPLES  OF  MANAGEMENT       291 


STRUCTURAL  AND   ECONOMIC   LIMITS 

Since  the  securing  of  teamwork  is  dependent  upon 
human  relationship  principles,  the  problem  of  active 
management  is  essentially  a  human  relations  problem. 
This  is  more  than  a  good-will  problem.  Good-will  can 
often  be  secured  through  so-called  welfare  work — and 
aids  the  management  in  securing  the  cooperation  of  its 
labor  personnel.  But,  important  as  it  is,  it  is  not  the 
whole  problem.  The  larger  part  of  the  problem  lies 
in  the  securing  just  the  requisite  action  from  each 
factor  in  the  business,  within  structural  and  economic 
limits,  through  the  appeal  to  action-inducing  motives. 

Securing  just  the  requisite  amount  of  action  is  a 
matter  of  providing  proper  balance  of  parts,  whose 
capacity  will  be  such  that  a  reasonably  complete  utiliza- 
tion of  each  will  keep  all  busy  for  the  full  time.  Thus, 
it  would  be  poor  management  to  hire  more  salesmen 
when  the  factory  is  already  unable  to  fill  orders.  It 
is  also  a  matter  of  coordination;  that  is,  each  part,  or 
production  center,  will  function  in  such  a  manner  as 
to  be  ready  to  receive  work  from  a  preceding  produc- 
tion center,  or  stage  of  production,  when  thut  produc- 
tion center  is  ready  to  deliver  its  quota  of  work.  This 
is  closely  approximated  in  both  Joseph  and  Feiss 
(Chapter  IV)  and  the  Printz-Biederman  Company 
(Chapter  IX)  through  central  planning  departments 
and  control  boards  which  show  the  progress  of  work 
from  one  stage  to  another. 

It  might  be  possible  to  secure  more  work  from  any 
one  of  these  production  stages,  but  this  would  be  in- 
efficient since  either  men  or  equipment  or  both,  some- 


292  INDUSTRIAL  GOVERNMENT 

where,  would  be  idle  while  others  were  endeavoring  to 
catch  up;  there  would  be  an  incomplete  utilization  of 
labor  even  where  the  piece-rate  wage  system  is  in  use. 

Men  are  induced  to  act  or  work  not  through  thought, 
but  through  feeling.  Thought  may  suggest  an  act, 
but  feeling  determines.  Men  often  do  things  which 
their  reason  condemns  up  to  the  very  moment  in  which 
feeling  results  in  action.  The  effectiveness  of  any  in- 
ducement depends  upon  the  kind  and  degree  of  feeling 
aroused  by  the  management.  It  is  necessary  then  to 
use  the  various  inducements  as  approaches  to  emotions, 
or  motives.  Motives  are  the  handles  by  which  men 
may  be  taken  hold  of  and  guided. 

These  can  all  be  traced  back  to  two  fundamental  mo- 
tives, hope  and  fear.  It  is  the  motive  of  hope  that 
induces  the  employees  of  the  White  Motor  Company 
(Chapter  I)  to  put  forth  their  best  efforts,  to  be  loyal 
to  their  company.  The  management  lays  before  them 
its  plans  for  a  coming  year  and  even  a  period  of  years. 
It  reveals  past  costs  and  profits  as  well  as  contemplated 
future  costs  and  profits.  It  shows  the  relation  between 
capital,  production,  and  wages.  The  charts  shown  to 
the  workers  indicate  a  proportionate  increase  of  wages 
with  a  mounting  of  production.  The  workers  are 
helped  to  visualize  the  future,  are  given  hope  for  in- 
creased income  both  as  to  amount  and  certainty, — and 
they  rise  to  their  opportunity.  Hope  unlocks  initiative, 
it  spurs  the  worker  on  of  his  own  volition,  taps  un- 
suspected strata  of  energy  and  devotion. 

But  this  is  true  only  so  long  as  the  worker's  scale 
of  wants  is  in  excess  of  his  ability  to  satisfy  them.  If 
his  income  reaches  the  point  where  no  wants  go  unsatis- 
fied, he  does  not  respond  to  the  stimulus.    Witness  the 


PRINCIPLES  OF  MANAGEMENT        293 

coal  miners  and  others  who  during  the  war  earned 
enough  in  four  days  to  live  for  a  week  and  then  laid 
off  for  several  days  each  week.  It  has  long  been 
known  that  more  than  a  subsistence  wage  for  certain 
levels  of  workers  along  the  Mississippi  simply  operates 
to  shorten  their  working  week.  Actual  experiments 
among  the  latter  have  shown  that  increases  of  wages 
above  what  is  needful  for  bare  livelihood  have  been 
accompanied  by  proportionate  decreases  in  the  num- 
ber of  days  worked.  For  most  workers,  this  is  not 
true  for  very  long.  A  period  of  high  wages  brings 
new  wants  into  existence  and  the  scale  of  living  rises 
to  a  new  level  which  organized  labor  fights  to  main- 
tain. 

Fear  may  impel  the  worker  to  effort.  But  it  is  a 
sorry  substitute  for  hope.  It  usually  is  most  effectively 
appealed  to  in  the  lower  levels  of  employment,  where 
men  have  not  the  vision  to  see  future  returns.  It  is 
this  motive  which,  in  times  of  depression,  when  goods 
are  not  relatively  scarce,  impels  workers  to  over- 
produce. They  work  hard  to  keep  their  jobs,  but  not 
because  of  interest  in  the  work  itself.  It  is  the  motive 
which  management  is  steadily  letting  go  where  it  can, 
educating  workers  instead  to  respond  to  the  stimulus 
of  hope.    Fear  inhibits,  hope  unlocks. 

AVENUES    TO    HOPE   AND   FEAR 

The  appeal  to  hope  is  made  through  holding  up  the 
possibility  of  wage  increases,  security  of  income,  or 
participation  in  the  management.  The  appeal  to  fear 
is  made  through  threat  to  close  these  avenues. 

Most  concerns  rely  on  the  first  of  these  avenues  to 


294  INDUSTRIAL  GOVERNMENT 

secure  the  cooperation  of  the  workers — naturally 
enough,  since  values  are  measured  in  terms  of  dollars, 
and  through  the  possession  of  dollars  the  individual 
can  secure  most,  if  not  all,  of  the  things  he  wants. 
While  it  did  speed  up  production  during  the  war  pe- 
riod, the  inadequacy  of  the  method  is  reflected  in 
post-war  labor  conditions. 

The  second  of  the  avenues  or  methods  is  receiving 
quite  considerable  attention.  Concerns  like  Nunn, 
Bush  &  Weldon  (Chapter  XI),  Joseph  and  Feiss 
(Chapter  IV),  the  Dennison  Manufacturing  Company 
(Chapter  VI),  the  Plimpton  Press  (Chapter  XIV), 
Hart,  Schaffner  and  Marx  (Chapter  XVI),  and  the 
Ford  Motor  Company  (Chapter  II)  are  doing  much 
in  this  direction. 

The  Dennison  Company  in  1919  had  set  aside 
$100,000  as  a  starter  for  an  unemployment  insurance 
fund.  This  is  to  be  increased  from  time  to  time  out 
of  the  earnings  of  the  company  and  ought  eventually 
to  reach  such  proportion  as  will  guarantee  every 
worker  full-time  employment  even  in  times  of  depres- 
sion, Joseph  and  Feiss  pay  a  service  bonus  of  five  cents 
per  day  for  each  year  of  service  up  to  ten  years,  and 
encourage  the  setting  aside  of  this  sum,  in  some  cases 
arbitrarily,  as  a  reserve  against  old  age.  Thus,  a 
worker  who  has  served  for  ten  years  or  more  is  re- 
ceiving fifty  cents  each  working  day  in  addition  to  his 
regular  pay  and  other  bonuses,  and  is  virtually  building 
up  a  pension  fund  for  himself. 

The  third  method  is  being  widely  exploited;  indeed, 
so  widely  as  to  give  many  an  observer  the  impression 
that  the  time  is  not  far  distant  when  labor  will  become 
an  important  part  of  management.     It  is  the  method 


PRINCIPLES  OF  MANAGEMENT        295 

used  by  the  Demuth  Company  (Chapter  VIII),  the 
Milwaukee  Electric  Railway  and  Light  Company 
(Chapter  XIII),  the  Printz-Biederman  Company 
(Chapter  IX),  the  Wayne  Knitting  Mills  (Chapter 
XII),  and  many  others  with  varying  success.  Some 
exponents  of  this  method  go  so  far  as  to  suggest  that 
managerial  policies  and  methods  can  best  be  determined 
by  agreement  between  the  several  groups  of  labor, 
capital  and  management,  each  possessed  of  equal  bar- 
gaining power.  In  order  to  accomplish  this,  it  is 
held  that  workers  must  deliberately  be  educated  for 
participation  in  management,  the  process  of  education 
to  be  begun  early  in  the  school  life  of  the  boy. 

THE   LAST    WORD 

There  is  reason  for  some  alarm  as  we  see  the  grow- 
ing degree  of  control  exercised  by  the  strictly  financial 
interests.  We  see  industry  after  industry  coming  under 
the  control  of  Wall  Street.  We  may  well  recognize 
the  dangers  in  absentee  ownership  and  particularly  in 
absentee  control.  The  danger  in  the  former  is  poten- 
tial; even  when  it  regards  itself  as  no  more  than  an 
investment  interest,  it  may,  if  it  wills,  encroach  upon 
the  active  management.  The  danger  in  absentee  con- 
trol is  real  and  ever  present.  It  was  to  get  away  from 
the  latter  that  the  Dennison  management  (Chapter  VI) 
adopted  its  present  scheme  of  capitalization  and  con- 
trol. It  was  the  fear  of  absentee  control  that  prompted 
the  workers  in  another  plant  discussed  in  this  volume 
to  protest  the  threatened  appointment  of  a  new  general 
manager. 

The  stupendous  profits  taken  from  industry  by  men 


296  INDUSTRIAL  GOVERNMENT 

who  in  many  cases  have  made  comparatively  small 
initial  investments  and  who  often  have  not  even  laid 
eyes  on  the  plants  which  they  control,  are  too  well 
known  to  need  any  comment  here. 

But  to  say  that  we  can  dispense  with  capital  is  quite 
another  thing.  Nor  is  it  likely  that  good  business  poli- 
cies can  be  effectively  determined  on  the  basis  of  delib- 
ate  agreements  reached  with  capital,  management  and 
labor  possessing  equal  bargaining  power.  Collective 
bargaining  really  fixes  the  limits,  but  is  not  the  admin- 
istrative source  of  business  policy. 

Granting  that  equality  of  bargaining  power  is 
desirable,  or  even  attainable,  it  still  remains  true  in  a 
society  based  on  division  of  labor  and  specialization 
of  effort  that  advances  of  material,  equipment,  food, 
shelter  and  clothing  must  be  made  before  a  single 
stroke  in  production  can  take  place.  It  still  remains 
true  that  the  pyramid  of  organization  must  have  an 
apex.  Somebody,  somewhere,  must  have  the  final 
authority,  must  say  the  last  word;  and  this  authority 
cannot  be  a  distributed  authority.  This  is  fundamental 
in  organized  effort.  Participation  in  management  by 
workers  without  capital  investment  must  in  the  very 
nature  of  things  be  confined  to  limitations  placed  by 
them  around  the  activities  of  management  and  the 
acceptance  by  them  of  responsibilities  delegated  by  the 
higher  management. 

REMEDY   FOR   ABSENTEE   CONTROL 

Accepting  this  position,  how  can  we  remedy  or  pre- 
vent the  evils  of  absentee  ownership  and  control?  If 
we  could  and  were  willing  to  wipe  the  slate  clean,  that 


PRINCIPLES  OF  MANAGEMENT        297 

is,  wipe  out  existing  rights,  obligations,  and  the  social 
and  political  institutions  which  protect  these  rights  and 
obligations,  it  would  be  easy  to  suggest  a  remedy.  But 
a  new  deal  is  quite  out  of  the  question:  we  must  play 
with  the  cards  as  they  lie  in  our  hands.  We  are  deal- 
ing with  a  situation,  not  merely  a  theory.  And  the 
situation  at  present  is  that  capital  is  the  most  powerful 
and  influential  among  the  factors  of  production.  The 
person  or  group  holding  capital  usually  has  the  whip 
hand  in  industry.  If  we  are  to  get  away  from  control 
of  industry  by  absentee  investors  or  owners  we  must 
have  a  new  leadership  to  take  their  place.  This  new 
leadership,  the  personnel  of  trained  management,  must 
win  its  way  to  a  position  where  it  can  make  the  final 
decisions  for  industry — say  the  last  word. 

From  the  time  that  control  of  indrstry  began  to 
pass  from  the  hands  of  the  skillful  craftsman  into  the 
hands  of  the  craftsman  who  was  the  abler  manager  of 
processes  and  men,  capital  accumulated  in  the  pos- 
session of  this  manager ;  it  strengthened  and  extended 
his  control.  Later,  accumulated  fortunes  made  possible 
the  employment  of  able  managers  without  capital,  and 
opened  the  avenues  of  managerial  development  and 
opportunity  to  thousands  of  men  with  ideas  and  execu- 
tive ability,  but  no  capital.  Also  there  developed  the 
credit  and  banking  system  which  mobilized  in  the  hands 
of  men  having  the  money  sense  the  vast  number  of 
small  individual  savings  deposited  with  their  banks. 
These  bankers  and  financiers  have  come  into  positions 
of  great  influence  and  power.  Men  without  industrial 
experience,  they  are  nevertheless  the  dictators  in  in- 
dustry through  their  ability  to  hire  managers  to  run 
the  industries  over  which  they  have  acquired  control 


298  INDUSTRIAL  GOVERNMENT 

but  are  not  qualified  actively  to  manage ;  they  can  dic- 
tate through  their  ability  to  grant  or  withhold  financial 
assistance  to  industries  in  need  of  funds. 

In  the  second  stage  of  the  development  briefly  traced 
above,  management  controlled  industry  because  it  also 
owned  sufficient  capital  to  finance  itself.  The  third 
stage  indicates  that  the  real  control  is  tied  up  to  the 
possession  of  capital,  and  when  management  and  capi- 
tal were  no  longer  vested  in  the  same  person,  manage- 
ment became  the  employee  of  capital.  At  present  man- 
agement is  principally  responsible  to  capital,  including 
absentee  owners  of  capital  because  capital  is  indis- 
pensable in  production  and  must  be  sought  where  it  is. 

That  capital  should  hold  the  whip  hand  is  almost  a 
commonplace  in  economics.  In  the  existing  system  of 
production,  one  not  likely  to  change  because  of  the 
manifest  economies  of  division  of  labor,  specialization 
of  effort,  and  the  consequent  long-drawn-out  process 
of  production,  advances  of  funds  must  be  made  at  all 
points  to  sustain  the  process  until  the  returns  can  be 
realized  somewhat  later.  Of  course  this  means  ad- 
vances of  labor  and  management  effort  as  well  as  of 
capital,  but  men  must  live  and  most  men  have  neither 
the  foresight  nor  the  inclination  and  usually  not  the 
ability  to  provide  for  their  own  maintenance  out  of 
savings  while  investing  their  labor  in  an  enterprise. 
Thus  it  comes  about  that  practically  all  of  the  advances 
are  made  by  capital.  Indeed  this  is  true,  even  when 
the  workman  can  accept  postponement  of  his  wages — 
for  he  can  do  this  only  as  he  has  transformed  past 
fruits  of  labor  into  money  capital.  Capital  can  be 
stored,  as  such;  labor  cannot  be  stored,  except  as  it 


PRINCIPLES  OF  MANAGEMENT        29^ 

becomes  capital  through  savings :  this  is  true  of  mana- 
gerial effort  as  well  as  common  labor. 

Capital  exists  in  the  shape  of  money,  a  universally 
accepted  medium  of  exchange.  It  is  general  and  can 
be  exchanged  for  anything — it  is  the  storehouse  of 
value  for  anything  which  has  a  money  price.  This  is 
not  true  of  labor.  Labor  is  not  only  perishable  with  the 
passing  of  the  moments  in  which  it  can  be  put  forth, 
but  it  is  also  of  specific  and  limited  nature.  It  has  a 
market  limited  to  the  demands  for  that  specific  effort, 
as  for  example  the  demand  for  the  maker  of  watches, 
whereas  capital  has  a  universal  market,  limited  only 
by  the  limits  of  demand  for  goods  with  a  money  price. 
This  is  true  even  when  capital  exists  in  the  form  of 
buildings,  machinery  and  materials  with  limited  use 
in  production :  for  such  capital  can  be  hypothecated, 
and  as  security  for  loans  from  banks,  or  for  bond  or 
preferred  stock  issues,  virtually  be  transformed  into 
the  universally  accepted  purchasing  power,  money. 

In  a  world  where  money  buys  nearly  everything, 
capital  is  the  symbol  of  power.  Someone  must  take 
the  final  risk  for  any  business,  must  stand  responsible 
for  payments  under  contract  with  the  several  factors 
in  production.  This  someone  must  own  or  have  access 
to  capital,  since  capital  or  money  is  the  thing  univer- 
sally desired  in  payment  for  services.  It  is  evident  then 
that  any  scheme  for  divorcing  active  management 
power  from  the  absentee  owner  of  capital  must  pro- 
vide for  some  other  factor  to  take  the  final  risks  in- 
volved. And  that  factor  can  safely  assume  those  risks 
only  with  capital  at  its  command. 

Of  all  the  factors  concerned  active  management 
seems  best  qualified  to  control  industry.     It  has  the 


300  INDUSTRIAL  GOVERNMENT 

initiative,  the  creative  imagination,  the  organizing  and 
executive  ability.  If  management  is  to  free  itself  from 
the  domination  of  absentee  owned  capital,  and  assume 
the  dictatorship  of  industry,  it  may  do  so  in  any  of 
the  following  ways: 

1.  Provide  its  own  funds  for  the  financial  responsibility 
of  the  going  concern:  it  assumes  in  part  a  capitalistic  func- 
tion. 

2.  Encourage  labor  to  save  and  invest  its  funds  in  in- 
dustry thereby  either  playing  labor-owned  capital  off  against 
investment-owned  capital  and  controlling  through  a  balance 
of  power,  or  going  so  far  as  to  substitute  control  by  labor- 
owned  capital  for  control  by  investment-owned  capital. 

3.  To  make  itself  more  nearly  indispensable  in  production 
than  any  other  of  the  factors,  and  thus  have  both  capital 
and  labor  compete  for  the  guidance  of  management  rather 
than  the  converse. 

4.  To  coerce  absentee-owned  capital  through  threat  of 
inefficiency  or  direct  action  by  organized  management,  to 
relinquish  its  active  control  and  accept  the  position  of  bond 
or  preferred  stockholder. 

5.  To  buy  capital  off,  making  its  owners  content  to  re- 
linquish active  control  in  consideration  of  greater  security 
and  adequate  returns  on  investments. 

A  complete  discussion  of  these  alternative  means  of 
removing  the  active  control  of  absentee  capital  would 
lead  us  into  a  realm  of  pure  speculation  far  too  broad 
for  the  scope  of  a  single  chapter.  The  idea  is  too  un- 
tried to  justify  us  in  definitely  committing  ourselves 
to  any  particular  scheme.  It  is  still  in  the  stage  of 
experimentation.  In  a  growing  number  of  instances 
the  managerial  group  is  taking  the  initial  steps  in  start- 
ing new  enterprises,  naming  itself  as  the  management, 
and,  in  addition  to  borrowing  funds,  is  providing  the 


PRINCIPLES  OF  MANAGEMENT        301 

initial  stake  in  the  enterprise.  Here  and  there  well- 
estabhshed  concerns  are  sharing  the  actual  manage- 
ment with  the  employees,  particularly  those  exercising 
management  functions.  In  several  cases  this  is  done 
through  participations  in  ownership  through  sharing  of 
profits. 

One  of  the  most  successful  of  the  latter  type  is  the 
Dennison  Manufacturing  Company  (Chapter  VI). 
Indeed,  it  has  gone  well  past  the  stage  of  experiment 
and  sets  a  new  mark  in  industrial  development. 

In  this  case  the  separation  of  absentee  ownership 
from  management  was  effected  through  the  agency  of 
that  corporate  device  known  as  common  stock.  It 
was  recognized  that  the  period  of  initial  risk  for  the 
owners  was  well  past.  The  owners  themselves,  for  the 
most  part,  were  not  so  much  interested  in  actively 
managing  the  company  as  they  were  in  security  and 
amount  of  income.  Following  the  initiative  of  the 
president  of  the  company,  himself  a  heavy  stockholder, 
the  common  stockholders  were  bought  off.  They  were 
given  preferred  stock  to  a  considerably  increased  par 
value  over  the  par  value  of  the  common  stock  sur- 
rendered. They  were  guaranteed  eight  per  cent  on 
the  new  stock  with  return  to  active  control  in  event  of 
failure  to  receive  the  agreed-upon  dividends.  They 
took  little  chance — they  had  much  to  gain  and  little 
to  lose  by  the  change.  For  a  time  they  shared  control 
with  the  active  management — until  the  accumulation 
of  a  large  reserve  after  paying  all  preferred  stock  divi- 
dends fully  justified  their  faith  in  that  management. 

Against  this  growing  reserve,  common  stock,  car- 
rying voting  power,  was  issued  as  profit-sharing  divi- 
dends   to    the    managerial    employees,    those    whose 


302  INDUSTRIAL  GOVERNMENT 

creative  imagination  and  management  of  the  going 
concern  produced  the  profits.  When  a  sufficient 
amount  of  common  stock  had  been  issued,  control 
passed  entirely  to  the  new  active  owners. 

The  rate  of  return  on  the  new  common  stock  was 
limited  to  ten  per  cent,  and  this  provision  together  with 
several  others  insures  a  steadily  growing  reserve  which, 
in  time,  if  not  already,  will  make  the  company  indepen- 
dent of  outside  capital,  and  so  avoid  what  is  possibly 
the  greatest  danger  of  a  return  to  absentee  control. 

The  effect  on  the  managerial  group  of  employees  has 
been  gratifying.  The  added  incentives  of  recognition 
and  financial  reward  have  brought  them  to  a  high  level 
of  efficiency.  Their  increased  sense  of  responsibility, 
their  realization  of  an  actual  financial  risk  in  the  con- 
cern, of  the  necessity  of  maintaining  a  strong  reserve 
fund,  the  possibility  of  automatic  loss  of  their  power 
as  well  as  profits  in  the  event  of  failure  to  meet  the 
preferred  stock  dividend  requirements,  have  increased 
their  productive  power  and  usefulness — have  developed 
teamwork  and  knitted  them  into  a  strongly  cohesive 
unit.  They  are  sufficiently  close  to  the  problems  and 
actual  situations  of  the  industry  to  imbue  them  with 
a  sense  of  responsibility  to  the  other  factors  in  pro- 
duction ;  they  are  far  more  likely  to  conserve  the  wel- 
fare of  their  industry  and  its  usefulness  to  society  than 
would  be  the  absentee  capitalists  who  see  in  their  con- 
trol the  sheer  exercise  and  increase  of  their  power  and 
profits. 

While  this  plan  does  not  include  the  employees  below 
managerial  rank  in  active  control  of  the  company,  it 
does  provide  a  share  of  profits  for  them.    Also  oppor- 


PRINCIPLES  OF  MANAGEMENT        303 

tunity  for  rising  to  the  level  of  employment  which 
entitles  them  to  participation  in  management  is  open 
to  them.  More  than  this  should  not,  perhaps,  be  asked 
for  these  employees  of  the  lower  levels.  It  is  not 
likely  that  they  will  for  a  long  time  be  qualified  or  even 
interested  in  undertaking  a  share  of  managerial  author- 
ity and  responsibility.  At  present  they  are  certainly 
unwilling  to  assume  financial  responsibility.  But  the 
proximity  of  fellow  workers  whose  superior  loyalty 
or  productivity  or  both  has  brought  and  is  bringing 
them  within  the  managerial  group  will  act  as  a  con- 
stant goad  and  incentive  to  these  lower  level  workers. 
The  way  to  promotion  into  the  upper  group  must  be 
kept  open  at  all  times. 

To  just  what  extent  and  on  what  terms  absentee 
owners  can  be  persuaded  to  relinquish  their  control 
we  can  only  speculate.  There  is  no  way  of  surely 
knowing  except  through  experimentation.  There  is 
encouragement,  however,  in  the  example  of  a  man  like 
Henry  Dennison.  The  far-seeing  owner  who  is  also 
an  active  manager,  who  has  sufficient  breadth  of  vision 
and  depth  of  human  understanding  will,  in  many  cases, 
follow  the  lead  of  the  president  of  the  Dennison  Manu- 
facturing Company.  A  succession  of  such  examples 
will  go  far  toward  bringing  absentee  owners  to  terms, 
whether  they  are  bought  out,  kept  out  or  put  out. 

Our  conclusion  is  that  we  have  got  to  develop  a  new 
leadership  of  active  managerial  vision  and  capacity, 
which  will  be  prepared  to  take  the  final  risks  in  enter- 
prise and  eventually  win  its  way  to  domination  over 
the  other  factors  in  production — it  must  be  the  very 
heart  of  a  vitally-functioning  going  concern. 


304  INDUSTRIAL  GOVERNMENT 


II.      TRAINING   THE   MANAGEMENT 

This  theory  rests  for  its  validity  on  the  possibility 
of  training  leadership  within  the  concern.  For  unless 
leadership  comes  from  within  it  will  have  to  come  from 
without ;  and  control  will  be  where  leadership  is. 

It  is  probably  fair  to  say  that  leadership  developed 
in  the  past  in  industry  throughout  has  not  been  of  a 
very  high  order.  Thanks  to  a  plentiful  supply  of 
labor,  especially  unskilled  labor,  the  power  of  summary 
discharge  was  generally  sufficient  to  maintain  disci- 
pline. If  any  workman  failed  to  produce,  or  prove 
amenable  to  discipline,  he  faced  discharge;  and  usually 
several  others  stood  waiting  to  take  his  place. 

But  with  the  growing  power  of  organized  labor  and 
its  relative  scarcity  the  threat  of  pending  discharge 
has  in  many  cases  proved  inadequate.  There  is  an 
increasing  need  for  effective  leadership  down  through 
the  ranks  of  industry,  an  increasing  need  for  capacity 
to  handle  men.  For  leadership  is  essentially  personal 
in  nature. 

Great  leaders  like  Marshall  Field  have  gone  far 
because  they  had  a  canny  knowledge  of  men  which 
enabled  them  to  pick  for  managerial  employees  the 
natural  or  potential  leaders.  They  have  trained  their 
leaders.  For  the  minor  executive  who  has  developed 
the  imagination  and  judgment  which  enables  him  to 
use  men  and  materials  effectively  within  his  limited 
vision  and  scope  of  authority,  it  is  but  a  series  of  steps 
to  widen  this  view  of  authority  to  include  markets  as 
well  as  departments.  The  essential  thing  is  the  ability 
to  lead  and  utilize  men. 


PRINCIPLES  OF  MANAGEMENT        305 

In  the  average  enterprise  the  foreman,  or  correspond- 
ing person  in  authority,  is  the  keystone  of  the  arch. 
He  comes  into  direct  contact  with  the  men.  To  them, 
he  is  the  firm.  President,  chairman  of  the  board  of 
directors,  are  but  names;  the  foreman  is  a  flesh  and 
blood  reality.  He  interprets  management  to  the  men, 
and  the  men  to  management.  It  depends  largely  upon 
his  relations  with  the  men  whether  they  are  satisfied 
with  their  wages,  their  security  of  employment  and 
their  voice  in  controlling  conditions  of  employment. 

Certainly  the  management  cannot  hope  to  have 
workers  assume  responsibility  whole-heartedly,  look 
upon  their  efforts  in  production  as  energy  investments 
whose  rate  of  risk  they  can  influence,  and  see  any 
connection  between  their  wages,  their  output  and 
profits,  unless  the  foreman  first  of  all  sees  these  things. 

The  average  foreman  is  a  man  who  has  been  given 
his  place  on  the  basis  of  seniority  or  mechanical  abil- 
ity as  well  as  his  driving  capacity.  It  is  rather  rare 
that  the  question  is  asked:  "What  can  he  do  for  his 
men?  Can  he  teach  them  to  become  better  workmen?" 
or  "Has  he  the  executive  capacity  which  will  make  him 
a  leader  of  men?" 

Consequently  he  is  usually  a  man  who  has  been  a 
workman.  Having  risen  from  their  ranks  he  has  never 
quite  ceased  being  one  of  them,  and  therefore  he  feels 
constrained  to  be  harsh  or  severe  with  his  men  to  im- 
press them  with  his  authority.  Intolerance  and  im- 
patience are  frequent  faults.  He  is  a  technician  rather 
than  a  psychologist,  a  driver  rather  than  a  leader,  full 
of  the  old  notion  that  the  best  way  to  get  results  with 
men  is  to  fire  them  if  they  do  not  "come  across."  He 
is  not  a  student,  for  it  has  not  been  necessary  to  learn 


3o6  INDUSTRIAL  GOVERNMENT 

more  than  he  could  see  with  his  own  eyes  or  do  with 
his  own  hands.  He  has  usually  little  patience  with 
books.  His  mind  works  objectively.  He  has  not  been 
taken  into  the  full  confidence  of  his  superiors  and  so 
does  not  feel  the  same  urge  to  loyalty  that  is  theirs. 
He  is  easily  suspicious  and  quick  to  resent  what  he 
terms  "passing  the  buck"  on  the  part  of  the  manage- 
ment. He  has  not  the  vision  which  enables  him  to  see 
opportunities  higher  up  and  to  prepare  himself  for 
them,  and  so  falls  short  of  his  greatest  usefulness  to 
the  concern  and  to  himself. 

This  is  the  average  man  whom  the  management 
must  train  to  his  higher  capacities,  to  qualifications  for 
the  task  of  personal  administration  of  workers.  What 
is  true  of  him  is  true  of  the  average  "underling"  in  the 
managerial  group. 

The  job  of  this  sub-executive  is  essentially  the  job 
of  management  brought  down  to  its  personal  aspects. 
It  is  his  job  to  secure  teamwork  in  the  lower  levels 
where  men  are  less  responsive  than  in  the  upper.  He 
should  possess  these  qualities : 

First:  he  should  appreciate  the  dignity  of  his  job. 
This  is  but  another  way  of  saying  that  he  must  whole- 
heartedly assume  the  responsibilities  of  his  function. 
He  must  see  himself  an  executive,  the  representative  of 
the  firm. 

Second :  he  should  see  the  relation  of  his  job  to  his 
department  and  to  the  business  as  a  whole.  Without 
this  understanding,  he  may  not  avoid  wastes  and  losses. 

Third:  he  must  understand  his  own  job  in  minute 
detail. 

Fourth:  he  should  understand  the  technical  process 
of  his  department  and  the  factors  employed  in  that 


PRINCIPLES  OF  MANAGEMENT        307 

process.  His  attitude  in  supervision  and  inspection 
may  lead  to  misuse  of  materials  and  serious  losses. 

Fifth:  he  must  be  square.  He  must  be  a  human 
nature  expert;  lack  of  tact  on  his  part  can  seriously 
disturb  the  morale  of  an  entire  force  of  employees. 

Sixth :  he  should  understand  the  principles  of  man- 
agement and  production  involved  in  his  work.  He 
should  not  be  of  the  type  of  so-called  "practical"  man 
who  sneers  at  all  theory. 

How  can  you  develop  such  a  leader? 

There  is  no  absolute  answer.  But  until  the  technical 
process  of  production  can  be  separated  from  the  device 
of  personal  control  by  foremen,  no  plan  can  ultimately 
succeed  which  does  not  make  the  foreman  better  quali- 
fied to  perform  the  two-fold  nature  of  his  task,  control 
of  materials  and  processes,  and  especially  of  the  human 
beings  engaged  in  those  processes. 

The  conference,  or  committee  method,  is  perhaps 
the  simplest  as  well  as  the  earliest.  Its  purpose  has  not 
always  been  so  much  to  train  foremen  in  their  duties 
as  to  enable  the  executive  in  charge  of  the  group  to 
keep  in  touch  with  affairs,  to  provide  a  means  of  iron- 
ing out  and  preventing  difficulties  among  the  foremen, 
to  better  coordinate  the  work  of  the  factory.  As  a 
by-product,  if  not  deliberately,  foremen  are  given  train- 
ing as  executives. 

It  is  this  method  which  is  used  in  the  Philadephia 
plant  of  the  great  Link  Belt  Company  (Chapter  III). 
The  groups  of  foremen  meet  with  their  superintendent 
daily  to  talk  over  such  questions  as  work  routing,  com- 
plaints of  failure  to  live  up  to  schedule,  plant  conditions, 
and  frequently  matters  of  discipline  and  welfare  of 
the  workmen. 


3o8  INDUSTRIAL  GOVERNMENT 

In  the  Ford  plant  (Chapter  II)  there  is  an  interest- 
ing development  of  the  committee  method.  This  is  not 
a  joint  meeting  of  superintendent  and  foremen,  but  a 
picked  group  of  thirty  specialists  who  spend  their  time 
adjusting  difficulties  between  foremen  and  men.  They 
are  "trouble"  specialists  whose  job  it  is  to  know  what 
is  going  on,  to  detect  trouble  before  it  ripens,  and  to 
help  keep  the  vast  Ford  family  at  peace  within  itself. 

The  packing  house  of  Swift  and  Company  selected 
John  Calder,  the  engineer  of  well-known  standing  and 
an  executive  of  broad  experience,  to  head  its  industrial 
work.  He  organized  classes  of  foremen  and  other 
executives  in  fourteen  plants  of  the  company,  with  a 
total  enrollment  of  over  three  thousand. 

The  outstanding  features  of  the  Calder  method  are 
the  lectures,  the  standardized  course  booklets  and  the 
answering  of  questions  at  several  meetings.  The 
groups  are  large  and  include  men  of  differing  rank, 
all  the  way  from  assistant-foremen  to  superintendent 
of  the  plant,  embracing  men  in  different  departments 
and  branches  of  the  work,  factory  and  office.  The 
course  booklets,  six  in  number,  are  cultural  as  well  as 
practical,  easy  to  read  and  interesting.  There  are 
problems  and  questions  which  are  handled  as  in  any 
regular  correspondence  course.  The  emphasis  appears 
to  be  on  the  educating  and  inspiring  of  foremen  more 
than  simply  training  them,  and  the  principal  agency 
is  the  lecture. 

A  very  different  method  is  that  of  Robert  B.  Wolf, 
industrial  engineer,  who  has  made  a  series  of  interest- 
ing experiments  in  the  paper  industry.* 

*  Amer.  Soc.  of  Mechanical  Engineers,  Publication  No.   1673 
(1918). 


PRINCIPLES  OF  MANAGEMENT        309 

Mr.  Wolf's  objective  is  to  arouse  the  creative  ca- 
pacities of  workmen  through  appeal  to  what  he  calls 
the  "non-financial  motives,"  to  get  each  man  to  com- 
pete with  his  own  previous  records.  The  basis  of  all 
these  motives,  he  holds,  is  interest  in  work,  which 
implies  a  desire  to  produce,  actuated  by  internal  mo- 
tives rather  than  external  discipline.  His  solution  for 
the  problem  of  training  active  management  to  in- 
creased capacity  for  initiative,  risk,  and  responsibility 
assumption,  would  be  to  arouse  interest  in  work.  To 
do  this  involves  changing  the  industrial  environment 
from  one  which  repels  to  one  which  attracts. 

To  arouse  interest  in  work  he  uses  no  lectures, 
home-study  courses  or  discussional  groups,  but  relies 
primarily  upon  graphic  individual  progress  records, 
for  both  workmen  and  foremen.  Thus  in  the  sulphite 
plant  of  a  paper  company,  he  had  attached  to  the  di- 
gesters, in  which  pulp  is  reduced  to  a  mass  of  fibres, 
charts  which  informed  the  workmen  about  reactions 
in  the  digester,  enabling  them  to  better  visualize  their 
work.  He  provided  other  charts  which  showed  stand- 
ardized curves  of  what  the  temperature  and  pressure 
of  the  vats  ought  to  be.  Allowance  for  variation 
from  the  standard  was  made  and  the  men  graded  on 
the  degree  to  which  they  approximated  the  exact 
standard.  An  absence  of  deviation  from  standard 
meant  perfect  control  of  the  process  and  a  grade  of 
100  per  cent.  It  meant  increased  product  of  improved 
quality. 

A  continuous  progress  record  of  performance  en- 
abled each  man  to  see  from  day  to  day  whether  his 
control  over  the  process  was  increasing  or  diminish- 
ing.    There  were  no  wage  bonuses  given,   but   the 


310  INDUSTRIAL  GOVERNMENT 

aroused  interest  of  the  men  in  their  own  progress, 
their  increasing  sense  of  power  and  control  over  their 
jobs,  their  efforts  to  better  their  own  past  records, 
brought  yearly  production  from  42,000  tons  to  m,- 
000  tons.  For  the  foremen  in  the  plant,  progress 
records  were  made  in  terms  of  costs  instead  of  quan- 
tity. 

The  idea  above  has  in  one  plant  been  carried  to  the 
point  of  considering  each  of  the  departments  as  a 
separate  team  in  an  industrial  league.  Each  team  has 
both  its  individual  and  team  progress  charts,  and  each 
week  is  given  a  rating  similar  to  that  of  a  baseball 
team,  based  on  this  progress  record.  The  teams  are 
then  shown  in  their  respective  standings,  recorded  as 
a  baseball  league  standing.  Rivalry  and  emulation  are 
aroused  as  well  as  interest  in  work  per  se:  the  result 
is  a  more  intelligent  and  productive  labor  personnel. 

Mr.  Benjamin  E,  Mallary,  of  the  Department  of 

Industrial  Education  of  the  Cleveland  Public  Schools,^ 

attacks  the  same  problem  with  a  somewhat  different 

emphasis   from  that  of  the  Calder  method.     These 

methods  were  used  in  different  plants,  under  different 

conditions,  in  response  to  the  demands  of  different 

managements.      While   both   strongly   emphasize   the 

need  of  developing  foremen,  Mr.  Mallary  apparently 

uses  the  lecture  less  and  the  group  discussion  to  a 

greater  extent.     His  is  the  seminar  rather  than  the 

lecture  method.     His  groups  are  smaller  and  more 

homogeneous,  confined  to  executives  of  uniform  rank, 

on  the  theory  that  men  will  talk  more  freely  with  men 

of  equal  rank  than  in  the  presence  of  superiors.     In 

*"The  Foreman,  His  Training  and  Education,"  Benj.  E.  Mal- 
lary, Annals  Amer.  Acad.  Pol.  &  Soc.  Set.,  Sept.,  1920. 


PRINCIPLES  OF  MANAGEMENT        311 

the  opinion  of  the  writer,  this  method  is  the  best  yet 
developed. 

The  procedure  is  slow  and  careful.  The  men's 
minds  are  prepared  for  the  ideas  of  a  training  course 
and  initiative  is  allowed  to  come  from  them.  A  sin- 
gle group  is  trained  first.  Its  members  become  the 
leaders  for  subsequent  self -initiated  groups.  Entrance 
is  purely  voluntary,  but  subsequent  attendance  is  re- 
quired. The  discussion  at  every  meeting  is  devoted 
to  the  specific  work  of  the  men  and  is  directed  towards 
the  solution  of  some  practical  problem. 

The  principles  of  training  as  laid  down  by  Mallary 
are  as  follows: 

First:  the  management  must  practice  policies  it  wishes 
foremen  to  practice. 

Second:  system  of  training  men  must  be  fairly  demo- 
cratic, but  not  so  much  so  as  to  destroy  all  distinctions  of 
rank. 

Third:  the  foremen  must  take  part  in  the  administration 
of  the  work,  in  both  organization  and  administration  of  the 
classes  and  groups. 

Fourth:  if  the  foremen  think,  they  will  expect  to  see 
their  ideas  taken  seriously  by  the  management. 

Fifth:  the  training  course  must  result  in  the  foremen 
taking  greater  part  in  the  active  management  of  the  plant. 

CONCLUSION 

It  must  be  remembered  always  that  the  real  prob- 
lem in  industry  is  that  of  human  relations.  It  is  nec- 
essary to  establish  personal  contacts  at  all  points  of 
transfer  of  authority,  instructions  or  reports.  The 
executives  at  these  contact  points  are  the  important 
links  in  the  organization.     The  executive  must  be  de- 


312  INDUSTRIAL  GOVERNMENT 

veloped  as  an  individual  and  trained  as  an  executive, 
and  whether  the  methods  used  be  those  of  Mallary, 
Calder,  Wolf  or  anyone  else,  the  principles  developed 
in  this  chapter  remain  fundamental.  The  real  pur- 
pose is  to  develop  self-initiated  acceptance  and  dis- 
charge of  responsibility  on  the  part  of  all  executives 
having  personal  contacts  with  the  employees.  Team 
work,  based  on  mutual  trust,  confidence  and  complete 
understanding  will  take  us  farther  toward  the  solu- 
tion of  industrial  relations  problems  than  any  mere 
industrial  relationship  schemes,  wage  bonuses  or  at- 
tempts at  conciliation. 


XXI 

PRACTICE  OF  LABOR  MANAGEMENT 
Willis  Wisler 

The  proper  practice  of  labor  management  strives 
to  maintain  a  balance  at  the  point  of  maximum  re- 
turn for  investors  of  capital  and  investors  of  labor  as 
producers,  and  for  both  as  consumers  of  their  com- 
mon product.  Ideal  labor  management  must  study  so 
to  coordinate  the  productive,  the  financial,  the  purchas- 
ing, and  the  sales  factors  in  its  business  as  to  promote 
and  to  justify  a  sense  of  security  among  the  workers. 
This  is  no  easy  matter.  Perhaps  until  good  labor 
management  has  become  the  rule  rather  than  the  ex- 
ception no  employer  can  hope  single  handed  to  suc- 
ceed. But  demonstrated  good  intention  can  disarm 
much  of  the  resentment  incident  to  failure. 

From  this  it  would  appear  that  labor  management 
is  not  a  function  that  the  employer  or  board  of  di- 
rectors can  hope  to  delegate  properly  to  any  subordi- 
nate. It  is  a  responsibility  peculiar  to  management 
itself.  As  the  business  grows  and  becomes  unwieldy 
various  subordinate  functions  of  labor  management 
may  be  delegated  for  economy  of  administration. 
Among  these  are  employment  management,  labor  main- 
tenance, and  welfare  or  social  service  work.  But  the 
determination  of  the  economic  relations  that  involve 

313 


314  INDUSTRIAL  GOVERNMENT 

the  division  of  the  product  of  the  industry,  the  em- 
ployer cannot  delegate  without  at  the  same  time  dele- 
gating with  it  his  own  authority  to  commit  the  com- 
pany. 

No  intelligent  labor  policy  can  be  set  up  or  admin- 
istered without  free  access  to  the  other  factors  of  the 
business.  The  unwise  purchase  of  raw  materials  may 
have  to  be  recouped  in  lower  wages  if  their  high  cost 
cannot  be  passed  on  to  the  consumer  through  sales. 
Again,  an  ambitious  sales  campaign  may  necessitate 
such  demands  on  a  labor  market  already  rising  as  to 
wipe  out  in  excess  wages  or  overtime  payments  all  ad- 
ditional profits.  Then  again  the  financial  conditions 
may  be  such  as  to  make  investors  suddenly  very  crit- 
ical. As  a  result  capital  may  be  restricted  and  the 
working  force  may  have  to  be  curtailed.  The  fail- 
ure to  take  into  account  these  interrelations  is  largely 
responsible  for  spasmodic  underemployment,  irregular 
employment,  cancellations,  and  financial  losses.  Even 
seasonal  and  cyclical  unemployment  can  be  largely  re- 
duced by  maintaining  a  due  balance  of  these  factors. 

Between  the  investors  of  capital  and  the  investors  of 
labor  lies  a  sort  of  industrial  "no  man's  land" — a  mid- 
dle area  of  waste.  In  prosperous  times  the  consumer 
can  easily  be  made  to  bear  the  burden  of  this  middle 
area  of  waste.  When  the  consumer  balks  at  high 
prices,  prosperity  languishes,  prices  fall,  the  demand 
for  production  disappears,  and  unemployment  threat- 
ens. Then  the  employee  is  constrained  to  bear  this 
burden  in  the  form  of  reduced  wages.  Both  are  com- 
placent in  times  of  high  prices — both  are  helpless  in 
the  face  of  declines. 

If  the  maintenance  of  wage  levels  could  be  enforced 


PRACTICE  OF  LABOR  MANAGEMENT    315 

in  the  face  of  declining  consumption,  the  employer  no 
doubt  would  develop  or  procure  the  requisite  mana- 
gerial skill  to  effect  compensating  economies  by  the 
reduction  of  this  middle  area  of  waste.  Experience 
confirms  this  view  in  those  industries  where  organized 
labor  has  approached  a  monopoly.  There  the  em- 
ployer is  constrained  in  dull  times  to  reduce  waste 
sufficiently  to  procure  the  means  for  maintaining  wage 
scales.  On  the  other  hand,  shrewd  employers  are 
using  the  leverage  of  falling  prices  and  threatened  wage 
levels,  not  so  much  to  reduce  wages,  as  to  stimulate 
cooperation  of  their  employes  with  them  in  concerted 
efforts  at  greater  economies  and  efficiencies. 

This  middle  area  of  waste  is  the  proper  field  for 
the  exercise  of  labor  management.  But  until  the  am- 
bitions of  mere  capital  and  of  mere  labor  to  manage 
per  se  can  be  restrained,  as  well  as  the  impatience  of 
investors  for  immediate  large  returns,  labor  manage- 
ment will  find  itself  in  the  same  difficulties  as  confront 
all  management. 

From  this  there  seems  but  one  hopeful  avenue  of 
escape — the  liberation  and  enfranchisement  of  man- 
agement on  the  strength  of  its  actual  achievement. 
Labor  management  as  a  major  phase  of  industrial 
management  must  educate  and  train  itself  for  its  right- 
ful role  of  organizer,  director,  and  leader. 

On  the  side  of  economic  relations  in  industry  labor 
management  cannot  hope  to  achieve  standardized  tech- 
nique and  formulae,  but  must  seek  to  remain  mobile, 
alert,  and  resourceful.  Like  management  itself, 
which  is  the  policy-determining  function  of  the  Board 
of  Directors  and  the  chief  executive,  it  cannot  be  re- 
duced to  technique  and  routine.     It  is  not  a  profes- 


3i6  INDUSTRIAL  GOVERNMENT 

sion — it  is  the  very  government  of  industry,  its  leg- 
islature which  cannot  delegate  its  legislative  function 
of  determining  the  labor  policy  along  with  the  finan- 
cial and  sales  policies. 

The  real  problem  of  labor  management  is  to  realize 
as  fully  as  possible  the  practical  expectation  of  pro- 
duction by  reconciling  the  human  element  to  it.  The 
impersonal  compulsion  of  scientific  management  can- 
not accomplish  this.  On  the  other  hand,  more  than 
simple  placation  or  ingratiation  is  needed.  Some- 
thing more  substantial  than  the  glad  hand  and  a  genial 
smile  are  needed  to  keep  the  home  fires  burning.  The 
reconciliation  must  go  to  economic  foundations.  The 
labor  manager  must  be  able  to  measure  bargaining 
power  and  economic  force;  he  must  forecast  market 
movements  intelligently;  he  must  be  on  guard  against 
mere  opportunism.  All  of  this  requires  more  than  the 
keeping  of  records,  the  manipulation  of  forms  and 
routine.  It  involves  analysis  and  vision.  All  the  la- 
bor manager's  energies  must  be  given  to  the  task  of 
knowing  the  truth  of  each  situation.  The  keeping 
of  records  by  the  labor  department  to  help  him  accom- 
plish this  must  be  designed  for  accuracy,  adequacy, 
immediacy  and  simplicity.  What  they  bring  to  the 
real  labor  manager  is  the  raw  material  for  him  to 
work  up  into  a  truthful  exhibit  of  what  should  be 
his  best  procedure.  It  is  this  interpretation  of  labor 
management  also  that  distinguishes  the  mere  glad  hand 
of  personnel  relations,  which  workmen  resent,  from 
that  sense  of  even  participation  in  the  problems  of  the 
business  which  appeals  to  their  self-respect. 

Personnel  relation — the  human  or  man-to-man  re- 
lations— on  the  other  hand,  admit  of  very  definite  or- 


PRACTICE  OF  LABOR  MANAGEMENT     317 

ganization  in  their  administration.  Here  technique 
and  routine  can  be  standardized.  Employment  man- 
agement, labor  maintenance,  service  or  welfare  work 
— all  have  to  do  with  these  personnel  relations.  Com- 
mon shop  practice,  ordinary  decency,  and  minimum 
legislation  have  brought  these  personnel  relations  into 
the  non-controversial  field  of  labor  management. 
What  constitutes  a  safe  place  to  work  can  be  authori- 
tatively determined  by  the  safety  engineer  and  not  by 
the  contest  of  opinions.  What  constitutes  decent 
treatment  of  workers  as  human  beings,  public  opinion 
and  universal  practice  have  determined  beyond  the 
need  of  debate.  These  matters  are  settled  by  trained 
and  experienced  experts  in  accordance  with  well  es- 
tablished rules  and  standards.  What  is  needed  here  is 
machinery  to  collect  data,  and  organization  to  assure 
performance. 

When  trouble  arises  in  this  field  of  personnel  rela- 
tions, it  is  usually  because  economic  issues  have  been 
injected  or  because  this  distinction  between  personnel 
management  or  its  subordinate  function  of  employ- 
ment management,  and  labor  management  itself  is  not 
recognized.  The  term  "labor  manager"  has  in  a  num- 
ber of  instances  been  loosely  given  to  personnel  offi- 
cials. This  is  a  dangerous  practice.  It  needs  only 
an  economic  or  financial  crisis  in  the  business  to  un- 
cover the  inability  of  such  misnamed  ofificials  to  deal 
competently  with  economic  issues. 

In  one  of  our  largest  clothing  markets  this  weak- 
ness disclosed  itself  in  a  very  dramatic  and  discon- 
certing fashion.  The  employers — the  real  labor  man- 
agers— had,  during  a  period  of  great  prosperity  and 
of  powerful  labor  organization,  permitted  their  "labor 


3i8  INDUSTRIAL  GOVERNMENT 

managers"  to  exercise  full  powers  in  making  and  ad- 
ministering collective  wage  agreements.  The  per- 
formance of  these  so-called  "labor  managers"  was 
marked  by  a  fine  tolerance  and  largeness  of  humane 
vision.  They  had  won  the  good  will  of  the  workers 
and  the  friendly  esteem  of  the  union  officials.  But 
when  the  balance  of  economic  power  slipped  suddenly 
toward  the  employers'  side,  these  same  "labor  man- 
agers," in  an  endeavor  to  maintain  the  equitable  bal- 
ance needed  for  the  continued  functioning  of  the  joint 
government  of  their  industry,  found  themselves  thrust 
aside  and  discredited.  Their  true  function  then  ap- 
peared. All  along  they  had  exercised  the  adminis- 
tration of  economic  relations  only  on  sufferance.  The 
men  who  paid  the  bills,  when  they  saw  an  opportunity 
to  impose  their  economic  will  upon  the  situation,  sum- 
marily withdrew  from  their  "labor  management  stafif" 
all  power  to  deal  with  economic  issues.  The  staff 
resigned.  They  felt  that  they  had  been  repudiated. 
As  a  matter  of  fact  it  would  seem  rather  that  all  along 
they  had  misconceived  their  real  place. 

On  the  other  hand,  the  supervisor  of  personnel,  the 
employment  manager,  or  the  welfare  director  con- 
stantly finds  himself  in  the  precarious  position  of  hav- 
ing to  impersonate  the  third  person  in  industry. 
Where  no  collective  agreements  or  machinery  for  ne- 
gotiations exist  it  is  the  personnel  official  who  finds 
himself  put  into  the  impartial  arbiter's  place.  Paid 
by  the  employer  he  is  called  upon  to  create  among 
the  workers  the  illusion  of  impartiality.  This  is  by 
no  means  impossible  of  achievement.  There  are  many 
employment  managers  and  other  personnel  officials 
who  by  their  personal  integrity,  the  enlightened  labor 


PRACTICE  OF  LABOR  MANAGEMENT     319 

policies  of  their  employers,  or  by  their  tact  and  per- 
sonal charm  accomplish  this  difficult  feat.  But  at 
best  the  personnel  man  as  the  impartial  agent  between 
employers  and  employees  is  in  a  precarious  and  an  un- 
sound situation.  He  is  forced  to  be  both  advocate  and 
judge. 

In  his  proper  place  the  personnel  or  the  employment 
manager  can  do  much  toward  guiding  his  corporation 
along  sound  lines  of  labor  management.  But  this  he 
must  accomplish  by  suggestion  and  advice.  He  cer- 
tainly exceeds  his  right  when  on  his  own  initiative  he 
sets  up  decisions  and  determinations  in  the  field  of  eco- 
nomic relations.  It  is  a  great  deal  better  for  him  to 
concern  himself  mostly  with  the  effective  administra- 
tion of  the  personnel  machinery  and  with  the  data,  rec- 
ords, and  exhibits  necessary  to  its  effective  adminis- 
tration. Arising  out  of  this  material  for  the  consid- 
eration of  the  management  in  setting  up  or  in  modify- 
ing labor  policies  analytical  reports  will  be  of  the  ut- 
most value.  Most  of  these  records  and  exhibits  will 
have  to  do  with  the  management's  efforts  to  reconcile 
the  will  of  its  employees  to  the  profitable  fulfillment 
of  production  standards. 

The  labor  manager  in  his  efforts  to  harmonize  the 
mechanistic  and  the  human  factors  of  production  finds 
himself  divided  between  two  conceptions  of  labor :  la- 
bor as  a  commodity  and  labor  as  human  beings.  Hav- 
ing set  up,  by  investigation  and  analysis,  what  seem 
to  him  in  his  engineering  capacity  reasonable  standards 
of  production,  his  natural  impulse  is  to  release  labor 
into  production  just  as  he  releases  raw  material,  power 
and  machinery.  From  the  engineer's  viewpoint  labor 
is  essentially  a  commodity.     It  differs  from  other  com- 


320  INDUSTRIAL  GOVERNMENT 

modities,  however,  in  being  animate.  The  commodity 
is  inextricably  tied  up  with  the  human  being  who  is 
marketing  it.  He  controls  it  in  a  manner  far  more 
intimate  than  the  other  commodities  of  industry  are 
controlled.  The  worker's  good-will  becomes  a  deter- 
mining factor  at  this  point.  The  labor  manager  at 
this  point  must  shift  from  the  position  of  engineer  to 
that  of  bargainer.  He  must  meet  labor  as  one  busi- 
ness man  deahng  with  another. 

This  he  does  not  always  do.  He  may  persist  after 
the  fashion  of  the  more  short-sighted  of  the  scientific 
management  school  in  an  effort  to  coerce  by  the  force 
of  mathematical  fact.  But  such  coercion  ordinarily 
breaks  down  at  the  crucial  point,  i.  e.,  the  point  where 
the  employer  urgently  needs  or  desires  maximum  pro- 
duction. This  very  urgency  gives  to  the  worker  the 
economic  advantage  with  which  to  force  virtual  aban- 
donment of  scientific  management  standards.  Many 
instances  of  alleged  successful  scientific  management 
have  been  studied  and  so  far  none  has  been  found  in 
which  concessions,  open  or  concealed,  have  not  been 
made  by  the  management. 

Only  after  repeated  failure  and  the  effective  resent- 
ment of  workers  has  scientific  management  come  to 
recognize  the  animateness  of  labor.  It  conceded  then 
that  the  laborer  should  be  treated  as  a  human  being; 
that  his  well-being  and  contentment  are  essential  to 
good  production  control.  Thus  was  ushered  into  in- 
dustry the  era  of  organized  welfare  work. 

It  has  been  repeated  within  the  last  years  to  trite- 
ness that  workmen  resent  being  patronized,  that  pa- 
ternalism is  un-American.  The  real  offense  of  wel- 
fare work  has  been  its  calculated  substitution  of  wel- 


PRACTICE  OF  LABOR  MANAGEMENT     321 

fare  work  for  economic  freedom  and  wages,  and  the 
studied  evasion  of  the  fair  administration  of  the  eco- 
nomic relations  between  employee  and  employer. 

Had  scientific  management  concerned  itself  more 
with  the  human  than  with  the  mechanical  factor,  had 
it  worked  toward  mechanical  efficiency  through  the  hu- 
man factor  by  giving  to  workers  a  sense  of  economic 
participation  there  might  never  have  been  occasion  for 
our  present  segregation  of  labor  management  from 
executive  management.  Again  had  the  functional 
foremanship  provided  for  under  scientific  management 
operated  properly  through  its  "disciplinarian"  or  had 
the  foremanship  of  the  old  type  been  free,  able,  and 
willing  to  work  toward  production  through  the  worker 
instead  of  imposing  the  job  upon  the  man,  there  might 
not  now  be  this  present  much  resented  encroachment 
on  the  foreman  by  the  personnel  and  employment  man- 
ager. One  of  the  most  significant  things  in  foreman- 
ship  training  is  its  effort  to  retrieve  its  lost  or  at  least 
its  greatly  impaired  position  in  labor  management. 
When  foremanship  truly  finds  itself,  and  employers 
by  their  own  insight  or  by  the  economic  compulsion 
of  organized  labor  assume  their  proper  functions  of 
the  real  labor  manager,  our  present  preoccupation  with 
labor  management  as  a  specialized  field  of  management 
will  probably  pass  away. 

While,  then,  the  contest  between  the  employer  and 
the  employee  in  this  bargaining  process  must  be  a  con- 
tinuous and  should  be  a  progressive  contest,  labor  man- 
agement, which  on  its  economic  side  must  be  the  chief 
executive  management  itself,  must  remain  fluid  and 
elastic.  This  is  no  argument  for  that  opportunism 
which  is  the  worst  kind  of  mismanagement.     The  em- 


322  INDUSTRIAL  GOVERNMENT 

ployer  must  know  his  business  well  enough  to  have  a 
set  of  definite  policies.  These  policies  it  is  that  give 
character  to  his  particular  industry.  But  in  the  ap- 
plication of  his  pohcies  to  changing  economic  condi- 
tions he  must  be  prepared  constantly  to  modify  and 
revise  his  behavior  with  a  view  of  getting  for  his  poli- 
cies their  greatest  possible  realization  in  practice.  In 
the  bargaining  encounter  he  must  know  as  accurately 
as  possible  not  alone  his  own  force  but  the  force  of 
his  employees. 

In  short  he  needs  an  "intelligence  service" ;  he  needs 
organized  machinery  to  supply  him  with  records  that 
are  immediate,  simple,  accurate,  and  adequate.  This 
is  not  an  easy  matter ;  but  it  is  not  too  hard  of  accom- 
plishment for  the  smallest  concern.  And  it  does  not 
need  to  be  complicated  even  for  a  business  of  increased 
size. 

A  careful  study  of  about  three  hundred  typical  em- 
ployment management  systems  seems  to  disclose  that 
much  of  the  needless  elaboration  in  employment  and 
personnel  forms  is  the  result  of  incomplete  analysis 
of  personnel  functions.  Forms  have  been  designed 
often  under  the  pressure  of  emergencies,  hastily  and 
short-sightedly.  A  proper  grasp  of  fundamentals  in 
most  cases  would  have  forestalled  the  emergency,  or  a 
careful  review  of  existing  forms  would  have  prevented 
the  perpetration  of  an  additional  form  by  passing  some 
existing  form  through  an  additional  manipulation. 
The  evil  of  this  indiscriminate  multiplication  of  forms 
is  not  merely  one  of  increasing  clerical  or  administra- 
tive burden.  The  more  serious  evil  is  the  loss  of  ef- 
fective coordination  of  records.  In  this  fashion  rec- 
ords come  into  being  without  their  proper  relation  to 


PRACTICE  OF  LABOR  MANAGEMENT     323 

other  vitally  associated  forms  being  considered.  Not 
only  are  opportunities  for  error  greatly  multiplied  but 
the  detection  and  discouragement  of  abuses  and  fraud 
are  greatly  impaired. 

The  more  compactly  the  data-collecting  and  record- 
keeping machinery  is  designed  the  more  economical 
will  be  its  operation  and  the  more  effective  will  be  its 
performance.  The  very  physical  adjacence  of  forms 
minimizes  neglect  and  error.  The  very  simplicity  of 
the  forms  themselves  discourages  omissions  and  fak- 
ing. It  is  obviously  absurd  to  encumber  forms  with 
self-incriminatory  questions  to  an  applicant.  Some  of 
the  forms  examined  may  have  been  excellent  sociolog- 
ical questionnaires.  But  the  employment  manager  or 
even  the  personnel  director  have  no  call  to  be  sociolo- 
gists except  as  it  serves  the  definite  needs  of  labor  man- 
agement. Why  ask  a  man  eager  for  a  job  whether 
he  is  a  drug  fiend,  an  epileptic,  or  of  unsound  mind? 
If  these  facts  are  essential  to  his  working  with  the  com- 
pany, let  an  expert  examine  the  applicant  and  deter- 
mine these  things.  If  blood  pressure,  venereal  dis- 
ease, or  defective  eyesight  are  vital  matters,  they  de- 
serve the  use  of  a  qualified  doctor  to  carry  on  a  com- 
petent investigation. 

There  are  really  only  four  stages  in  the  cycle  of  em- 
ployment, (i)  engagement,  (2)  follow-up  supervision, 
(3)  adjustment,  and  (4)  termination.  Labor  should 
be  issued  with  even  greater  care  than  tools  and  stores. 
The  labor  requisition  should  be  tied  in  with  the  proper 
job  specifications  on  one  side  and  with  the  engagement 
notice  on  the  other.  This  can  be  readily  accomplished 
by  having  the  original  engagement  record  placed  on 
the  back  of  the  labor  requisition  memorandum.     A 


324  INDUSTRIAL  GOVERNMENT 

three  by  five  card  is  a  convenient  size.  Attached  to 
this  should  be  the  dupHcate  engagement  record  for  the 
foreman's  file.  This  duplicate  should  be  tied  in  with 
the  completed  record  of  the  employee's  career  in  that 
department.  For  this  reason  the  termination  record 
should  be  placed  on  the  back  of  the  duplicate  engage- 
ment record.  When  notice  of  termination  is  given 
either  by  the  foreman  or  by  the  workman,  the  latter 
returns  with  this  termination  notice  to  the  hiring  agent 
for  adjustment,  for  transfer  (which  is  a  form  of  ad- 
justment), or  for  separation  from  the  company  pay- 
roll. By  the  proper  arrangement  of  these  two  pairs 
of  employment  forms  the  engagement  record  can  be 
typed  with  carbon  duplicate.  Transfers  are  combina- 
tions of  departmental  terminations  and  departmental 
engagements.  Labor  departmentally  dismissed  had 
best  be  reissued  (unless  separated  from  the  plant  pay- 
roll)  just  like  any  other  labor. 

Fads  also  play  their  part  in  complicating  forms. 
Every  caption  should  undergo  the  severest  scrutiny 
before  it  is  allowed  to  be  incorporated  into  a  form. 
It  is  better  to  err  on  the  side  of  simplicity.  It  is  bet- 
ter to  use  captions  that  will  permit  of  variation  in  the 
entries  made  under  it,  e.g.,  it  is  better  to  have  for  gen- 
eral purposes  one  captain — Education — than  to  list  a 
half  dozen  or  more  degrees  or  types  of  education.  If 
one  particular  degree  or  type  of  education  is  essential 
to  employment  that  is  a  different  matter.  The  pro- 
cedure in  such  cases  is  clear  enough.  Often  personnel 
directors  are  carried  away  by  the  zeal  of  the  statisti- 
cian. They  refine  and  refine  their  forms  to  the  point 
of  utter  impracticability.  Usually  the  enthusiasm  of 
the  originator  gives  a  semblance  of  successful  opera- 


PRACTICE  OF  LABOR  MANAGEMENT     325 

tion  to  machinery  so  intricate  that  it  must  collapse  as 
soon  as  its  designer  passes  away.  There  are  per- 
sonnel and  employment  managers  unfortunately  who 
take  pride  in  this  very  defect.  They  surround  their 
function  with  elaborate  hocus-pocus.  Such  misguided 
men  should  be  vigorously  reformed  or  driven  out; 
they  are  a  real  menace  to  all  concerned  in  industry. 

The  forms  described  above  can  be  conveniently  made 
up  into  pads  with  a  stub  for  (a)  keeping  a  count  on 
the  number  of  labor  requisitions  used,  and  (b)  for  en- 
tering a  brief  follow-up  report  on  the  new  worker  by 
the  foreman.  At  monthly  intervals  these  stubs  can 
be  called  in  for  consideration  by  the  personnel  or  em- 
ployment manager  and  entered  upon  the  worker's  in- 
dividual record  folder.  Thus  the  work  of  four  forms 
is  condensed  into  two  and  these  combined  into  one. 
The  manipulation  of  this  one  "5  x  6"  sheet  parallels 
physically  the  steps  of  the  cycle  of  employment 
through  which  the  worker  passes  while  with  the  com- 
pany. The  files  for  these  forms  had  best  be  kept  nu- 
merically. 

The  employee's  individual  record  folder  serves  as 
the  alphabetical  or  directory  file.  This  form  should 
be  designed  to  hold  in  one  central  file  all  pertinent  facts 
regarding  each  employee.  The  face  may  be  designed 
to  carry  the  identification  data — name,  age,  sex,  race, 
etc.,  and  the  pre-employment  record  needed  for  deter- 
mining his  suitability  for  employment.  The  back  of 
the  folder — which  can  now  be  folded  into  a  five  by 
eight  container  is  arranged  to  carry,  in  the  form  of 
successive  entries  properly  distributed  under  columnar 
headings,  the  post-employment  history  of  the  worker. 
When  the  applicant  selected  to  fill  the  foreman's  labor 


326  INDUSTRIAL  GOVERNMENT 

requisition  has  been  accepted  by  the  foreman  the  re- 
ceipted engagement  record  with  this  labor  requisition 
on  the  reverse  returns  to  indicate  a  completed  hiring. 
These  data  are  posted  to  the  first  line  of  the  post-em- 
ployment record,  and  to  the  daily  labor  record.  The 
engagement  record  is  then  filed  numerically,  the  in- 
dividual employee's  record  folder  is  filed  alphabetically, 
and  a  carbon  of  the  daily  labor  record,  showing  en- 
gagements, terminations,  transfers,  and  rate  changes, 
is  sent  to  the  paymaster  for  daily  adjustment  of  the 
payroll.  If  the  paymaster  makes  such  adjustments 
promptly  and  makes  adjustments  only  from  these  daily 
labor  records,  many  of  the  troubles  of  the  time  office 
and  of  payoffs  will  be  removed.  A  perpetual  labor 
inventory  can  be  kept  by  posting  daily  to  a  monthly 
form  the  totals  from  the  daily  labor  record.  Both 
these  summary  forms  should  be  designed  to  show 
reasons  for  engagements,  transfers,  and  terminations. 

From  these  four  blanks  embodying  the  essential  em- 
ployment processes  in  compact  interlocking  fashion, 
six  closely  interrelated  forms  can  be  designed  and  op- 
erated to  satisfy  all  the  personnel  necessities  in  the 
largest  plant.  For  plants  of  less  than  five  hundred 
the  Individual  Record  Folder  and  the  Perpetual  Labor 
Inventory  alone  would  be  sufficient. 

The  condensation  and  simphfication  described  above 
was  actually  made  in  a  company  employing  nearly  five 
thousand.  They  represent  the  boiling  down  of  forty- 
six  separate  forms  into  six  forms.  Most  of  the  forty- 
six  were  already  inoperative,  although  carried  along. 
The  number  needed  for  plants  of  less  than  five  hun- 
dred employees  is  only  three  forms.     The  aim  of  this 


PRACTICE  OF  LABOR  MANAGEMENT     327 

procedure  was  to  achieve  accuracy,  adequacy,  immedi- 
acy, and  simplicity  of  records. 

The  practically  minded  employer  will  naturally  want 
to  know  just  how  the  keeping  of  labor  records  can 
help  him  to  improve  his  labor  management,  how  indi- 
vidual records  of  performance,  of  attendance,  of  be- 
havior can  affect  him.  Their  general  desirability  he 
is  usually  ready  to  acknowledge,  but  the  special  ap- 
plications to  his  own  business  are  not  so  apparent  to 
him.  Much  of  the  employer's  hesitancy  in  adopting 
such  forms  and  record  keeping  arises  out  of  the  feel- 
ing that  these  are  theoretical  refinements  which  big 
business  alone  can  afiford.  For  this  the  complexity  and 
elaboration  of  forms  described  above  is  largely  to 
blame.  More  of  this,  however,  is  the  result  of  bad 
accounting  tradition.  Much  of  our  accounting  prac- 
tice rests  on  the  ancient  traditions  of  mercantilism — 
that  values  inhered  in  the  things  of  wealth  and  that 
their  behavior  lies  beyond  human  control.  Account- 
ing under  such  a  conception  can  be  merely  an  investiga- 
tion of  past  experience  in  order  to  arrive  at  the  re- 
sults of  accomplished  facts.  Even  when  the  concep- 
tion of  "standard  costs"  came  along,  the  mechanical 
processes  were  too  cumbersome  to  achieve  the  imme- 
diacy of  records  which  all  accountancy  should  strive 
for. 

Ingenuity  has  now  contrived  a  variety  of  machines 
to  accomplish  this  immediacy.  Employers  need  no 
longer  grope  their  way  by  the  feeble  and  uncertain 
light  of  last  year's  cost  figures.  But  in  spite  of  this, 
progress  is  slow.  Employment  management,  largely 
having  its  origin  in  cost  accounting,  has  a  chance  to 
achieve  this  immediacy.     When  the  employer-manager 


328  INDUSTRIAL  GOVERNMENT 

can  see  moving  before  him  day  by  day  the  current 
behavior  of  his  business;  when  he  can  follow  with 
graphic  charts  the  fluctuations  of  markets,  of  produc- 
tion, and  of  finance,  he  is  well  guarded  against  errors 
of  negligence  or  oversight.  He  knows  at  every  turn 
where  he  is. 

Formerly  in  dull  times  manufacturers  shut  down 
their  plants  as  soon  as  their  books  showed  no  profit. 
More  recently  shrewd  employers  have  come  to  recog- 
nize the  advantage  of  working  their  plants  even  at  a 
loss.  Just  where  the  shut-down  point  in  each  case  lies 
is  the  problem  of  accounting  practice.  Undoubt- 
edly it  lies  near  the  point  where  the  net  loss  equals  that 
overhead  expense  which  will  continue  even  if  the  plant 
is  idle — rent,  interest  on  capital,  depreciation,  taxes, 
insurance,  etc.  Even  when  this  point  is  reached  it  may 
be  well  to  continue  operating  to  keep  intact  a  well- 
organized  working  force  of  employees  or  a  smooth- 
ly working  stafif  of  executives.  To  determine  the  wis- 
est procedure,  to  avoid  the  needless  irritation  of  em- 
ployees, to  decide  how  far  to  go  in  maintaining  the 
good-will,  the  sense  of  security,  and  the  contentment 
of  the  working  force  requires  the  aid  of  the  most  ac- 
curate, adequate,  and  immediate  records  of  all  phases 
of  the  business. 

One  prominent  mid-western  company  in  such  a  situ- 
ation decided  to  encourage  greater  economies  by  ac- 
quainting their  employees  of  what  reduction  in  the 
unit  cost  of  production  was  needed  to  enable  the  com- 
pany to  continue  its  full  working  force.  When  this 
reduction  of  production  cost  was  not  achieved  lay-ofifs 
occurred  of  those  employees  whose  individual  records 
showed  a  consistently  poor  performance.     To  enable 


PRACTICE  OF  LABOR  MANAGEMENT     329 

the  workers  to  readily  grasp  the  situation  these  rec- 
ords of  unit  cost  and  per  capita  performance  were  kept 
graphically.  Delinquent  or  defective  workers  were 
warned  and  placed  on  probation,  and  when  some  of 
them  were  finally  dropped  there  had  been  brought 
about  a  general  feeling  of  fair  play  and  mutual  con- 
fidence between  company  and  operatives. 

But  it  is  not  only  in  times  of  unusual  depression 
that  records  become  of  vital  importance  to  good  labor 
management.  Periods  of  unusual  prosperity  need  the 
wholesome  discipline  and  the  foresighted  safeguarding 
which  effective  record-keeping  alone  can  give.  The 
dramatic  collapse  of  the  clothing  industry  in  the  last 
quarter  of  1920  is  an  excellent  example  of  ill-advised 
overproduction  which  might  have  been  prevented  by 
accuracy  and  immediacy  of  records.  Manufacturers, 
deceiving  themselves  with  the  mass  of  fictitious  orders 
from  equally  eager  distributors,  purchased  raw  mate- 
rials and  engaged  labor  indiscriminately.  Ignoring 
the  threat  of  permanently  high  wage  levels  they  bid 
up  labor  higher  and  higher.  The  pervading  com- 
plaisance on  all  sides  during  this  period  of  fictitious 
prosperity  changed  almost  over  night  into  one  of  the 
most  bitter  industrial  conflicts  the  clothing  industries 
have  known.  Cancellations  precipitated  the  situation. 
But  in  any  event  the  deflation  must  have  come.  Here 
the  whole  of  labor  management  has  been  basically  af- 
fected by  misguided  or  vicious  purchase  and  sales  poli- 
cies. 

Viewed  in  more  detail  we  find  that  in  the  individ- 
ual shops  poor  production  control  played  an  analogous 
part.  The  flow  of  production  in  most  cases  was 
spasmodic.     In  some  cases,  through  defective  supply. 


330  INDUSTRIAL  GOVERNMENT 

poor  routing,  or  bad  dispatching;  in  other  cases  by 
dehberate  intent,  operations  were  being  thrown  out  of 
balance.  To  recover  the  "balance  of  the  shop,"  work- 
ers were  subjected  to  constant  alternations  between  lay- 
offs and  overtime.  Shrewd  and  none  too  scrupulous 
foremen  dammed  up  the  flow  of  garments  to  "rush" 
strategic  operations.  With  stacks  of  garments  piled 
up  on  one  side  and  with  clamorous  operatives  calling 
for  work  on  the  other,  the  operatives  between  were 
stampeded  into  top  speed  production.  Thus  there  was 
created  in  many  shops  a  state  of  nerves  no  less  than 
a  state  of  mind  that  readily  exploded  into  violence  on 
slight  provocation.  The  presence  of  impartial  adjust- 
ment machinery  in  some  of  the  larger  clothing  mar- 
kets provided  a  safety  valve  for  much  of  this  tense 
discontent.  But  where  such  machinery  was  lacking 
or  where  it  functioned  inadequately,  labor  management 
broke  down  under  the  strain  of  poor  production  control 
unchecked  by  proper  record  keeping. 

Sometimes  a  business  grows  large  and  unwieldy  so 
suddenly  or  so  imperceptibly  that  all  manner  of  con- 
fusions and  abuses  arise  in  its  various  departments. 
One  large  shirt  and  collar  manufacturing  corporation 
found  that  its  wage  levels  had  gone  alarmingly  high. 
It  was  found  that  this  was  due  to  two  causes:  first, 
the  bidding  of  departments  against  each  other;  second, 
workers  using  the  highest  rates  in  other  departments 
as  the  fulcrum  for  prying  their  own  rates  higher.  The 
first  of  these  causes  was  disclosed  in  the  transfer  rec- 
ords, the  second  in  the  paymaster's  records.  The  only 
sensible  way  to  check  this  confusion  appeared  to  be  to 
arrange  all  the  operations  in  a  sequence  of  relative 


PRACTICE  OF  LABOR  MANAGEMENT     331 


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332  INDUSTRIAL  GOVERNMENT 

value.     A  thorough  job  analysis  was  made  and  a  job 
ratio  curve  was  developed. 

Referring  to  Chart  I  the  succession  of  columns  at 
the  bottom  of  the  chart  represent  the  relative  values 
of  a  series  of  operations  as  named  in  the  upper  part 
of  the  chart.  The  columns  are  subdivided  to  propor- 
tion the  job  valuations  to  the  three  factors  selected  for 
the  job  analysis.  An  arbitrary  unit  common  to  the 
whole  series  had  to  be  devised.  This  was  done  by  di- 
viding the  series  into  groups  of  five  each.  Within 
each  group  the  highest,  lowest,  and  medium  points  with 
regard  to  the  factor  considered  were  fixed.  The  two 
intermediate  points  were  then  determined  by  compari- 
sons. These  job  values  were  then  translated  into  the 
Job  Ratio  curve.  The  Average  Weekly  Earnings 
curve  was  then  plotted  and  comparisons  made  with  the 
Job  Ratio  curve.  Variations  from  parallel  behavior 
were  then  checked  up  against  the  labor  turnover 
curve.  The  factors  covered  in  the  job  analysis  were 
also  checked  against  the  labor  turnover  curve  for 
confirmation  or  discrepancies.  Such  discrepancies 
were  made  the  object  of  special  investigation.  In  or- 
der to  properly  qualify  the  labor  turnover  curve, 
which  is  a  percentage  curve,  the  job  quotas  of  opera- 
tives is  given  at  the  top  of  the  chart.  Obviously  the 
labor  turnover  as  a  percentage  will  run  higher  in  the 
smaller  departments.  Appropriate  adjustments  must 
be  made,  therefore,  of  the  labor  turnover  curve  at 
such  points  to  make  fair  and  trustworthy  comparisons. 
Attention  is  called  to  the  absence  of  labor  turnover  in 
the  first  department  over  the  period  of  the  chart  (six 
months)  in  the  parallelism  between  the  job  ratio  and 
the  average  weekly  earnings  curve.     The  flattening  of 


PRACTICE  OF  LABOR  MANAGEMENT     333 


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334  INDUSTRIAL  GOVERNMENT 

the  latter  curve  is  a  natural  tendency  but  none  the  less 
interesting  as  a  wage  phenomenon. 

From  these  data  earnings  could  be  safely  determined. 
From  the  same  data  a  chart  showing  the  standard  per- 
sonnel needs  of  the  company  by  operations  was  pre- 
pared. These  two  curves  together  with  the  labor  turn- 
over curve,  the  absentee  curve,  the  production  curve 
and  the  unit  cost  curve  were  placed  on  one  master 
chart.  Daily  adjustments  of  these  curves  kept  the 
chief  executive  constantly  advised  of  current  conditions 
in  the  business.  Departures  from  normal  became  the 
objects  of  immediate  inquiry.  Losses  were  met  on 
the  threshold  and  dealt  with  before  they  became  facts 
for  post-mortem  analysis  and  regrets. 

Even  in  normal  times  industry  is  full  of  congestion 
and  abuses  which  proper  record  keeping  can  be  de- 
signed to  prevent  or  to  reduce.  A  prominent  eastern 
tannery  under  an  intelligent  directorate  had  installed 
forms  and  routine  for  recording  and  analyzing  ab- 
senteeism. Such  a  system  can  be  extremely  simple. 
In  this  case  a  daily  absentee  sheet  was  drawn  off  from 
the  "out"  clock  rack  by  posting  to  it  the  unrung  clock 
cards.  The  investigation  of  these  absences  and  the 
preparation  of  the  analytical  exhibits  for  a  force  of 
six  hundred  took  the  time  of  one  person.  The  periodic 
recurrence  of  prominent  "peaks"  of  absenteeism  in- 
vited further  investigation.  A  chart  was  prepared 
showing  graphically  the  distribution  by  causes.  It  was 
found  that  the  "lay-ofifs"  curve  ran  nearly  parallel  to 
the  total  absentee  curve.  The  curve  of  "absences  less 
lay-offs"  was  then  constructed  with  the  lay-offs  curve 
shown  in  dotted  line  above.  Referring  to  Chart  2  the 
curves  are  arranged  with  the  calendar  scale  horizontal 


PRACTICE  OF  LABOR  MANAGEMENT     335 

and  the  numerical  scale  vertical.  The  solid  line  curve 
indicates  absenteeism  after  lay-offs  have  been  sub- 
tracted. The  dotted  line  curve  indicates  total  absen- 
teeism including  lay-offs.  The  space  between  these 
two  curves  indicates  absenteeism  due  to  lay-offs  be- 
cause of  lack  of  work.  These  curves  reduced  to  ab- 
sentee percentages  for  the  month  are  straightened  out 
into  the  parallel  horizontal  lines.  The  upper  of  these 
two,  29%,  covers  all  absenteeism;  the  lower,  12.5%, 
covers  only  absenteeism  from  which  the  lay-offs  have 
been  subtracted.  It  will  be  seen  that  the  loss  by  lay- 
offs amounted  to  16.5%  of  the  total  possible  working 
time  for  the  plant.  When  5%  is  considered  a  fair 
normal  of  absenteeism  it  will  be  seen  that  the  condi- 
tion here  shown  was  unusually  dangerous  at  a  time 
of  labor  scarcity.  Many  of  these  lay-offs  found  their 
way  into  the  labor  turnover.  Employees  could  not 
afford  to  remain  with  a  company  where  so  frequent 
interruptions  of  earnings  were  occurring. 

The  loss  of  time  by  lay-offs  was  so  conspicuous  that 
a  conference  of  executives  including  foremen  was 
called  by  the  management.  The  conference  was  a 
lively  one.  The  discussion  located  the  cause  of  these 
lay-offs  in  the  management's  policy  of  buying  hides  in 
small  lots.  The  management  excused  itself  on  the 
score  of  lacking  adequate  storage  facilities.  But  the 
records  had  disclosed  so  dangerous  a  situation  in  so 
unmistakable  a  fashion  that  the  management  pledged 
immediate  steps  toward  having  additional  warehouses 
put  up. 

A  further  investigation  of  these  absentee  curves 
showed  that  not  only  the  "frequency"  of  absence  be- 
cause of  alleged  sickness  but  the  ''severity,"  i.e.,  the 


336  INDUSTRIAL  GOVERNMENT 

duration  of  absences,  decreased  periodically  on  Friday 
of  each  week.  This  proved  to  be  pay  day.  On  the 
following  Saturday  there  was  always  a  pronounced 
rise  in  frequency.  The  company  promptly  changed 
its  pay  day  to  Saturday  forenoon.  Another  com- 
pany in  a  similar  instance  shrewdly  changed  its  pay 
day  to  Monday,  aiming  thereby  to  reduce  habitual 
Monday  absences.  The  resourceful  labor  manager 
will  see  many  opportunities  for  using  such  absentee 
data. 

It  does  not  follow,  of  course,  that  all  types  of  indus- 
try will  have  like  needs  and  like  experiences.  But  the 
matters  touched  on  in  the  foregoing  examples  are 
pretty  common  to  all  manufacturing  concerns.  There 
are  many  special  points  equally  valuable  but  of  more 
limited  application.  Two  rival  Ohio  firms  in  one  of 
the  larger  cities  made  labor  surveys  of  the  communities 
around  their  plants.  As  a  result  they  found  that  they 
were  hiring  out  of  each  other's  territories.  The  result 
was  inconvenience  to  workers,  transportation  troubles, 
tardinesses,  absenteeism  in  bad  weather  and  usually 
ultimate  increases  of  labor  turnover.  They  solved 
their  problem  by  giving  their  employees  the  chance  to 
exchange  plants  at  no  loss  of  income.  They  went 
farther.  They  arranged  for  transfers  from  one  plant 
to  the  other  for  promotional  purposes  when  no  oppor- 
tunity offered  within  reasonable  time  in  their  own 
plant.  This  required  some  courage,  but  they  found  it 
paid  in  increased  good-will  and  confidence  among  their 
employees.  Another  plant  made  an  analysis  of  its 
working  force  by  ages  and  found  that  the  accurate 
character  of  the  work  required  could  be  best  supplied 
by  men  past  forty.    Another  company  with  a  monopoly 


PRACTICE  OF  LABOR  MANAGEMENT     ZZ7 

in  an  automobile  essential  found  they  could  reduce  all 
their  operations  to  automatic  machinery.  They  in- 
vested in  a  staff  of  high  class  supervisors  and  ran  their 
plant  most  profitably  with  hoboes  and  transients.  An- 
other corporation  manufacturing  kitchen  supplies 
found  by  a  special  job  analysis  that  they  could  operate 
most  profitably  by  hiring  only  cripples. 

The  superintendent  of  a  large  furniture  factory  will 
hire  only  Scandinavians.  Another  will  hire  any  north 
European  stock  except  Finns.  The  General  Superin- 
tendent of  a  large  railway  repair  shop  "mixes"  his 
foreigners  to  obstruct  their  organization  by  agents  of 
the  unions.  Another  "balances"  his  nationalities  so  as 
to  effect  the  same  purpose  by  grouping  workers  in 
proper  proportions  of  races  antagonistic  to  each  other. 
All  such  plans  to  achieve  any  success,  even  according 
to  their  ideals,  need  to  be  based  on  data  that  are  ac- 
curate, adequate,  immediate,  and  simple. 

Because  a  business  is  small  is  nO'  good  reason  for 
assuming  that  these  things  are  not  equally  important 
for  it.  If  anything,  the  small  business  needs  to  be  more 
minute  in  its  records.  It  may  be  that  the  employer  in 
the  small  concern  carries  these  facts  and  records  in  his 
head.  Well  and  good  so  long  as  he  is  on  the  job.  But 
to  guarantee  continuity  of  labor  policies  there  must  be 
continuity  of  machinery.  The  machinery  should  be 
designed  for  the  business.  The  outside  expert  can  help 
a  great  deal  in  giving  proper  proportion  to  those  fac- 
tors and  facts  which  lie  too  near  the  employer  for  him 
to  focus  properly.  But  if  the  outside  expert  strives  to 
cram  the  business  into  a  ready-made  form  or  routine, 
trouble  is  sure  to  follow.  Each  establishment  must 
work  out  its  own  industrial  salvation  in  its  own  way. 


338  INDUSTRIAL  GOVERNMENT 

A  careful  consideration  of  the  foregoing  chapters 
will  bear  out  this  conclusion.  Here  are  a  variety  of 
types  of  labor  management,  no  two  alike,  ranging  from 
the  benevolent  autocracy  of  Ford  to  the  courageous 
democracy  of  Filenes.  And  yet  all  appear  to  have  been 
successful  to  an  unusual  degree.  The  reason  is  not  far 
to  seek.  It  is  that  each  of  these  establishments  has  a 
definite  labor  policy,  each  has  created  the  appropriate 
machinery  for  administering  its  labor  policy,  and  each 
has  procured  for  its  labor  policy  the  widest  and  frank- 
est publicity  among  those  affected.  It  can  hardly  be 
the  particular  form  of  industrial  government,  nor  any 
one  device  that  has  achieved  this  uniform  success. 
These  are  but  the  tools  with  which  to  work  out  well 
defined  labor  policies. 

The  White  Motor  Company  seems  to  have  come 
nearest  to  a  realization  of  these  truths.  Without  mak- 
ing any  pretense  of  democracy  and  without  recourse 
to  any  unique  device  or  method,  on  a  straight  unmod- 
ified day  rate,  they  have  developed  a  remarkable  shop 
morale.  This  they  have  done  almost  entirely  by  keep- 
ing their  eye  intently  on  their  business  and  designing 
the  entire  machinery  of  their  labor  management  to 
accomplish  their  one  avowed  purpose — the  ultimate 
survival  of  the  White  Motor  Company.  To  this  funda- 
mental purpose  they  give  the  widest  publicity  among 
their  employees.  Thus  they  have  created  a  community 
of  interest  in  the  business  itself  that  arises  out  of  the 
practical  self-interest  of  each.  The  management  is 
interested  in  survival  and  financial  returns ;  so  are  the 
workers.  In  such  a  situation  data  collecting,  record 
keeping,  and  report  making  are  of  as  great  concern  to 
the  workers  as  to  the  employer.    The  investors  of  cap- 


PRACTICE  OF  LABOR  MANAGEMENT     339 

ital  and  the  investors  of  labor  alike  look  to  those 
charged  with  their  company's  management  for  the 
essential  facts — they  want  them  to  be  accurate,  ad- 
equate, immediate  and  simple. 

If  each  instance  of  successful  labor  management  is 
carefully  examined  it  will  be  bound  to  rest  on  three 
conditions  :  ( i )  a  definite  and  consistent  labor  policy 
inaugurated  and  backed  up  by  the  chief  executive  or 
board  of  directors;  (2)  the  organization  of  machinery 
for  putting  into  effect  these  labor  policies,  and  (3)  the 
competent  administration  of  such  machinery. 


XXII 

INSTITUTING  EMPLOYEE  REPRE- 
SENTATION 

O.  F.  Carpenter 

Shop  organizations  of  employees  are  not  a  new  and 
sudden  discovery.  In  the  early  period  of  trade  union- 
ism committees  of  workmen  were  frequently  selected 
in  the  shops  to  seek  wage  adjustments  or  the  settlement 
of  grievances.  Local  government  makes  its  appeal  in 
the  industrial  as  well  as  political  field.  Many  of  the 
trade  unions  of  today  have  made  the  shop  committee  a 
part  of  the  structure  of  the  union.  To  such  committees 
are  usually  entrusted  the  maintenance  of  the  union 
organization  and  the  enforcement  of  its  rules,  the 
negotiations  with  the  management  for  the  settlement 
of  purely  local  questions,  and  the  duty  of  observing  the 
compliance  of  the  firm  with  the  trade  agreement  and  of 
reporting  any  violations. 

Shop  committees  of  various  types  have  been  making 
their  appearance  in  non-union  shops.  Some  of  these 
committees  were  informal  and  but  temporary,  while 
others  have  become  permanent.  A  great  many  of  them 
have  been  developments  from  purely  social  activities 
on  the  part  of  employees.  Some  employers  who  had 
sensed,  during  the  past  twenty  years,  the  need  of  social 
and  welfare  work  and  who  were  aware  of  the  necessity 

340 


EMPLOYEE  REPRESENTATION        341 

of  avoiding  paternalism,  had  urged  the  employees  to 
form  committees  or  clubs  of  their  own  choosing  for 
participation  in  or  direction  of  that  work.  The  safety 
campaigns  have  been  often  conducted  in  the  factories 
by  committees  of  the  workers,  and  there  has  been  a 
tendency  in  some  instances  to  vest  these  committees 
with  other  functions.  Several  of  the  organizations 
described  in  the  preceding  chapters  have  developed  by 
this  gradual  and  pragmatic  process.  When  an  indus- 
trial problem  looms  up  it  has  been  only  natural  and 
logical  that  the  employer  turn  for  consultation  to  some 
shop  organization  with  which  he  has  been  cooperating 
on  some  other  shop  problem.  Successful  experience  in 
such  mutual  efforts  has  led  to  the  extension  of  the 
functions  of  such  organizations  of  employees,  and,  quite 
frequently,  to  the  creation  of  new  agencies  for  handling 
the  questions  arising  in  the  field  of  industrial  relations. 
The  Milwaukee  Electric  Railway  and  Light  Com- 
pany (Chapter  XIII)  affords  an  example.  At  first  the 
works  organization  was  a  joint  council  which  was  con- 
cerned with  the  administration  of  a  benefit  program. 
So  it  continued  for  seven  years,  when  departmental 
committees  were  elected  by  the  employees  to  perform 
the  usual  functions  of  collective  bargaining.  The 
Filene  Cooperative  Association  (Chapter  V)  is  another 
example  of  gradual  growth.  Its  beginning  was  an 
Insurance  Committee  elected  in  1898.  Several  other 
committees  were  soon  at  work.  The  increasing  num- 
ber of  employees  and  their  increasing  participation  in 
store  affairs  soon  rendered  it  impossible  to  transact 
business  at  mass  meetings.  Then  a  council  was  elected, 
having  one  representative  from  every  fifty  employees. 
This  council  is  a  legislative  body.     In  the  meantime  a 


342  INDUSTRIAL  GOVERNMENT 

board  of  arbitration,  elected  by  and  from  the  employees, 
was  set  up.  From  time  to  time,  as  occasion  showed  the 
need,  there  have  been  extensions  of  the  authority  of 
these  bodies.  From  the  early  participation  in  insur- 
ance, social  and  recreational  activities,  the  participa- 
tion of  employees  has  been  extended  to  practically  every 
question  that  concerns  company  and  people,  or  indi- 
viduals or  groups  among  the  employees  or  management. 
A  variation  from  this  line  of  development  is  the  Nunn, 
Bush  and  Weldon  Company  of  Milwaukee.  (Chapter 
XI.)  Its  first  council  represented  only  those  employees 
who  had  been  three  years  or  longer  in  the  service  of  the 
company.  Today  a  shop  committee  represents  all  the 
regular  employees  and  is  exercising  larger  functions 
than  the  original  joint  council. 

The  plants  that  had  established  employee  organiza- 
tions for  participation  in  the  settlement  of  factory 
questions  prior  to  the  period  of  intensified  unrest  that 
has  swept  the  country  since  the  spring  of  1918  seem 
to  be  the  least  affected  by  this  unrest.  The  machinery 
has  been  at  hand  for  meeting  those  problems  and,  what 
is  more  to  the  point,  management  and  employees  had 
gained  that  experience,  understanding  of  and  confi- 
dence in  each  other,  which  are  a  prerequisite  of  a  suc- 
cessful endeavor  at  joint  shop  government.  In  several 
instances  the  existing  organization  had  to  be  modified 
or  enlarged  to  meet  the  greater  needs,  but  this  is  not 
difficult  to  accomplish  with  going  organizations. 

But  where  this  organization  and  experience  are  lack- 
ing, the  firm  that  desires  to  organize  its  industrial 
relationship  finds  itself  confronted  immediately  with 
the  problem  of  how  to  introduce  employee  representa- 


EMPLOYEE  REPRESENTATION        343 

tion.  The  National  Industrial  Conference  Board  has 
well  said: 

"The  employer  who  has  determined  upon  the  intro- 
duction of  a  works  council  into  his  establishment  needs 
to  exercise  great  tact  and  wisdom  in  initiating  the 
project.  The  success  of  a  works  council  is  frequently 
endangered  at  its  inception  by  the  manner  in  which  it 
is  instituted."  It  cannot  be  too  strongly  emphasized 
that  the  method  of  devising  and  instituting  a  shop 
organization  of  employees  is  of  prime  importance. 

Employee  representation  has  been  introduced  in  non- 
union shops,  as  a  rule,  by  the  initiative  of  the  manage- 
ment. It  is  obvious  that,  in  these  shops  where  the  firm  is 
in  complete  control,  the  first  step  toward  popularizing 
the  shop  government  is  "to  sell"  the  idea  to  the  direc- 
tors of  the  firm's  policies.  Oftentimes  the  urge  has 
come  from  within  the  management  itself.  Some  re- 
sponsible official  has  read  an  account  of  "Industrial 
Democracy,"  or  of  the  workings  of  some  shop  com- 
mittee or  works  council,  and  has  been  convinced  of 
the  wisdom  of  such  a  policy.  He  has  advocated  such 
a  policy  in  the  inner  councils  of  the  company  and  has 
succeeded  in  getting  the  firm  to  make  the  move.  In 
other  cases  employers  have  been  persuaded  by  some 
advocate  like  John  Leitch.  In  still  other  cases  the 
company  has  made  the  move  to  circumvent  the  efforts 
of  the  unions  to  organize  the  employees. 

The  employer  who  is  contemplating  such  a  move 
should  give  the  proposition  thorough  consideration  be- 
fore acting.  He  should  have  estimated  the  probabili- 
ties of  the  move  and  should  know  to  what  extent  he 
is  prepared  to  share  his  industrial  power  with  the 
employees.    The  employer  should  realize  that  his  sane- 


344  INDUSTRIAL  GOVERNMENT 

tion  of  employee  representation  implies  faith  in  the 
integrity,  capability,  and  good  judgment  of  the  work- 
ers. It  goes  without  saying  that  he  should  be  sincerely 
convinced  that  the  new  arrangement  will  prove  advan- 
tageous to  the  employees  as  well  as  to  the  firm  in  the 
solution  of  shop  problems.  The  employer  who  con- 
ceives employee  representation  as  a  means  to  beat  the 
unions,  or  as  a  clever  device  for  putting  over  certain 
policies  advantageous  to  the  firm,  is  bound  to  bring 
discredit  upon  the  organization  sooner  or  later  and 
will  tnereby  nurture  in  the  employees  that  scepticism 
and  mistrust  which  militate  against  further  efforts 
looking  toward  cooperative  action. 

The  employees  are  the  critical  factor.  Their  ap- 
proval and  confidence  are  necessary  conditions  of  suc- 
cess. During  periods  of  unrest  and  class  antagonism 
they  are  suspicious  of  the  moves  of  employers  and 
their  cooperation  cannot  long  be  expected  unless  con- 
crete evidence  of  the  advantages  of  the  new  arrange- 
ment are  promptly  forthcoming.  It  is  highly  advisable 
to  acquaint  the  employees,  at  the  very  start,  with  any 
plan  that  is  to  require  their  cooperation.  No  pains 
should  be  spared  in  making  the  employees  understand 
the  full  significance  of  the  proposal.  The  firm  that 
ignores  the  employees,  works  out  the  representation 
plan  and  adopts  it,  and  then  posts  notices  of  that  fact 
in  the  works,  acts  upon  a  bad  psychology.  Under  such 
circumstances  the  workers  will  be  asking  each  other: 
"What's  the  company  trying  to  slip  over  on  us  now  ?" 

If  the  employees  are  trade  unionists,  and,  especially, 
if  their  union  or  unions  have  previously  been  recog- 
nized and  dealt  with,  the  management  will  act  wisely 
to  take  into  consideration  the  policies  and  attitude  of 


EMPLOYEE  REPRESENTATION        345 

the  union  or  unions  involved.  Trade  union  leaders 
are  on  the  lookout  for  what  they  term  "company 
unions,"  which  they  regard  as  subterfuges  for  "real 
unions"  and  as  the  greatest  menace  to  their  trade 
unions.  Rightly  or  wrongly,  the  trade  unionist  feels 
that  such  a  move  on  the  part  of  the  company  is  a  chal- 
lenge for  a  fight  to  a  finish  (Chapter  X),  as  many 
industrial  tragedies  of  the  past  few  years  bear  witness. 
The  employer  who  does  not  wish  thus  to  challenge 
unionists  is  confronted  with  the  problem  of  getting  the 
sanction  of  the  union  or  unions  concerned  for  the 
proposed  shop  organization.  The  approval  of  the 
local  union  officials  is  sufficient  for  those  unions  that 
provide  a  large  measure  of  local  autonomy,  while  for 
unions  of  the  more  centralized  type  it  will  be  neces- 
sary to  negotiate  with  the  international  officials. 

The  foremen  are  a  factor  second  in  importance  only 
to  the  employees.  Foremen  are  the  point  of  contact 
of  management  with  workers.  Being  face  to  face  with 
the  problems  of  management  every  day,  they  see  these 
problems  in  the  concrete;  and  their  judgment  and  coun- 
sel cannot  safely  be  ignored.  It  is  the  foremen  who 
interpret  and  apply  those  policies  that  affect  employees. 
The  foremen,  also,  should  know  from  the  very  begin- 
ning what  is  being  proposed  in  the  way  of  new  policies. 
They  are  just  as  insistent  on  participation  in  what  is 
transpiring  as  are  the  more  militant  among  the  work- 
ers. The  conditions  that  make  necessary  the  change 
in  policy,  the  purposes  sought  to  be  attained  under  the 
new  plan,  the  new  responsibilities  and  the  changes  in 
methods  that  will  thereby  devolve  upon  the  foremen, 
should  be  thoroughly  explained  to  them,  and  their  co- 
operation and  approval  should  be  sought  at  every  step 


346  INDUSTRIAL  GOVERNMENT 

in  the  development  of  the  new  plan.  They  must  be 
thoroughly  trained  and  prepared  for  the  change  when 
it  comes. 

Too  much  emphasis  cannot  be  placed  upon  this 
preparation  of  foremen.  The  foreman  has  been  aptly 
characterized  as  "the  key  man  of  industry."  He 
actually  is  that.  In  order  to  measure  up  to  his  job 
he  must  know  the  features  of  the  firm's  policy,  and 
must  know  well  in  advance  any  proposed  changes  in 
policy.  He  must  be  prepared  to  explain,  to  defend, 
as  well  as  to  apply  the  new  policy.  The  adequate 
training  of  foremen  and  consultation  with  them  is  thus 
seen  to  be  a  part  of  the  problem  of  instituting  em- 
ployee participation  in  shop  affairs. 

The  first  step,  then,  in  the  introduction  of  employee 
representation  is  the  approval  of  the  move  by  the  three 
factors:  company,  foremen,  and  employees.  If  the 
shop  is  trade  union,  then  there  is  a  fourth  factor,  the 
union  or  unions  affected. 

All  the  factors  concerned  having  agreed  upon  the 
first  step,  the  next  "step  in  order"  is  the  preparation 
of  the  plan,  the  constitution  of  the  shop  government. 
There  are  a  few  organizations,  however,  that  deferred 
the  drafting  of  a  plan  or  constitution  until  after  ex- 
perience had  shown  what  the  constitutional  require- 
ments should  be  (Chapters  V,  IX,  XI),  but  the  great 
majority  have  followed  the  political  precedents  of  for- 
mulating the  constitution  first  and  getting  the  experi- 
ence under  the  constitution,  after  which  amendments 
to  the  constitution  can  be  made  as  experience  shows 
their  advisability. 

The  preparation  of  the  plan  should  be  entrusted  to 
a  council  or  committee  made  up  of  representatives  from 


EMPLOYEE  REPRESENTATION        347 

the  several  factors  already  enumerated.  Attention  has 
already  been  called  to  the  inadvisability  of  the  manage- 
ment's submitting  a  plan  of  its  own  devising  at  an  elec- 
tion of  its  own  calling.  This  is  not  affirming  that  any 
plan  so  formulated  and  introduced  is  foredoomed  to 
failure.  There  are  several  plans  in  operation  that  were 
introduced  in  this  manner  and  are  considered  success- 
ful, but  there  are  equally  striking  failures  on  the  same 
score.  None  of  those  so  introduced  escaped  a  period 
of  distrust,  while,  at  the  same  time,  they  were  laid  par- 
ticularly open  to  the  charge  of  being  purely  a  "com- 
pany union." 

The  methods  used  in  introducing  employee  represen- 
tation in  America  range  all  the  way  from  that  of 
formulation  of  the  plan  by  the  company  and  submitting 
it  to  the  employees  for  their  approval  to  formulation 
of  the  plan  by  the  employees  and  submitting  it  to  the 
management  for  the  latter's  approval. 

The  method  followed  by  the  Goodyear  Tire  &  Rub- 
ber Company,  Akron,  Ohio,  exhibits  a  wide  joint  par- 
ticipation in  the  move  from  the  start.  The  decision 
for  the  new  shop  organization  was  made  by  the  man- 
agement, but  immediately  all  factors  were  given  repre- 
sentation in  the  preliminary  organization  designed  to 
prepare  a  plan  and  introduce  it.  The  following  ex- 
cerpts from  the  announcement  in  the  Wingfoot  Clan 
(the  factory  paper),  March  29,  19 19,  describe  the 
initial  step  and  give  the  purpose  in  view : 

"The  ending  of  the  war  has  brought  to  our  Akron  fac- 
tory, as  well  as  to  others,  the  need  of  a  program  of  re- 
construction. .  .  .  Probably  the  greatest  change  will  be  the 
initiation  and  progressive  development  of  employees'  repre- 
sentation on  all  subjects  of  industrial  relations  between  the 


348  INDUSTRIAL  GOVERNMENT 

factory  management  and  the  men.  The  first  step  will  be 
the  establishment  of  a  council  of  industrial  relations  to 
meet  with  the  factory  manager,  composed  of  five  members 
of  the  executive  council,  the  manager  and  assistant  man- 
ager of  the  Labor  Department,  two  foremen  elected  by 
the  foremen,  and  six  non-salaried  employees,  of  whom  two 
will  be  elected  by  the  Service  Pin  Association,  one  by  the 
Flying  Squadron,  one  by  the  Engineering  Division  and 
two  by  the  Production  Departments.  All  important  ques- 
tions of  industrial  relations  will  be  passed  on  by  this  council 
and  it  will  formulate  a  plan  to  establish  a  legislative  body 
somewhat  along  the  lines  of  our  national  federal  Congress 
to  give  representation  on  matters  of  industrial  relations  to 
all  Goodyearites  over  eighteen  years  of  age,  who  are  Ameri- 
can citizens,  understanding  the  English  language,  who  have 
had  six  months'  continuous  service  or  one  year  total  service 
with  the  factory.  These  Goodyear  industrians  will  have 
a  large  voice  in  shaping  the  policy  of  the  factory  in  the 
future  on  such  subjects  as  employment  and  working  con- 
ditions; housing  and  living  conditions;  safety;  sanitation; 
health ;  restaurants ;  employees'  transportation ;  recrea- 
tion, athletics,  and  entertainment;  continuous  work  and  re- 
construction problems.  The  efficiency  and  permanence  of 
this  plan,  as  in  any  democratic  form  of  management,  will 
depend  on  the  interest  taken  by  those  eligible  to  vote,  and 
we  have  every  confidence  that  you  will  measure  up  to  the 
opportunity." 

This  announcement  has  the  merit  of  setting  forth 
briefly  and  definitely  what  is  involved  in  the  proposed 
move.  It  shows  also  to  what  extent  the  management 
is  prepared  to  go  in  sharing  its  powers  with  the  rep- 
resentatives of  the  employees.  The  announcement 
indicates  the  management's  preference  for  a  plan  of 
organization  and  the  qualifications  it  expects  to  estab- 
lish as  the  requisites  of  industrial  citizenship.  It 
might  have  been  better  had  the  management  refrained 


EMPLOYEE  REPRESENTATION        349 

from  this  incidental  injection  into  the  announcement 
of  its  views  on  these  two  particulars. 

Then  followed  the  election  of  representatives  from 
the  several  departments  to  the  Council  of  Industrial 
Relations.  In  its  issue  of  April  5th,  the  factory  paper 
announced  the  coming  elections.  Industrial  citizenship 
was  explained,  and  the  requisites  were  given  for  this 
citizenship  and  for  voting,  in  the  Goodyear  elections. 
Registration  lists  were  posted  in  each  department  and 
the  workers  were  urged  to  see  that  they  were  not 
omitted  from  the  lists,  if  qualified. 

Different  methods  of  conducting  elections  were  used 
in  the  different  departments  in  order  that  the  resulting 
experience  might  aid  in  the  formulation  of  that  sec- 
tion of  the  constitution.  The  foremen  held  a  meeting 
and  made  nominations  from  the  floor.  The  election  of 
their  representatives  took  place  by  secret  ballot  at  this 
same  meeting.  The  procedure  for  Plant  No.  i  illus- 
trates the  method  of  election  in  the  Production  De- 
partments. The  registration  lists  were  posted  and  one 
week  was  given  for  employees  to  obtain  corrections, 
The  Plant  was  divided  into  twenty  precincts,  and  the 
voters  in  each  precinct  were  instructed  to  vote  for 
three  persons.  The  person  who  received  the  highest 
vote  became  the  electoral  representative  for  that  pre- 
cinct. The  twenty  persons  thus  elected  constituted  the 
Electoral  Committee  for  the  department.  The  Elec- 
toral Committee  elected  one  representative  on  the 
Council  of  Industrial  Relations.  "By  this  system  the 
man  who  obtains  an  office  should  obtain  it  on  merit 
and  ability  and  not  on  account  of  popularity."  The 
Service  Pin  Association,  a  group  of  2,000  workers 
who  have  been  five  years  or  longer  v^ith  the  company, 


350  INDUSTRIAL  GOVERNMENT 

conducted  its  election  by  mail.  Nominations  were 
made  by  petition,  the  names  of  ten  members  being 
required,  A  ballot  was  prepared  with  the  names  of 
the  candidates  thus  nominated  and  the  "past  history 
of  each  nominee."  Voting  booths  were  placed  at  one 
of  the  gates,  and  the  members  were  permitted  to  leave 
and  vote  at  any  time  on  the  day  of  election. 

The  Council  of  Industrial  Relations  was  now  chosen. 
The  second  step  was  the  preparation  of  a  plan  for  the 
Goodyear  factory.  At  the  initial  meeting  the  Factory 
Manager  amplified  the  earlier  announcement.  He 
analyzed  the  present  industrial  situation,  pointed  out 
its  weaknesses,  especially  on  the  side  of  industrial  re- 
lations, called  attention  to  the  great  factors  of  modern 
industry  and  dwelt  on  the  duties  and  responsibilities  of 
each.  He  indicated  again  the  extent  to  which  the  com- 
pany was  willing  and  able  to  curtail  its  powers  in  favor 
of  the  representatives  of  the  employees.  This  address 
to  the  Council  shows  that  the  Factory  Manager  had 
thoroughly  considered  the  proposition  before  launching 
it  and  knew  definitely  what  position  the  company  would 
take  on  the  many  questions  that  were  bound  to  arise. 

At  its  second  meeting  the  Council  studied  and  dis- 
cussed the  plan  of  employees'  representation  of  the 
Youngstown  Sheet  &  Tube  Company;  at  the  next 
meeting  it  was  the  plan  of  the  Printz-Biederman  Com- 
pany, and  so  it  continued.  A  recent  publication  of  the 
Goodyear  Company  summarized  the  work  of  the  Coun- 
cil as  follows: 

"This  organization,  purely  temporary,  studied  all  forms 
of  employees'  representation,  shop  committees,  House  and 
Senate  plans  and  the  like  as  they  found  them  in  America. 
They    obtained    statements    from    workmen    and    managers 


EMPLOYEE  REPRESENTATION        351 

in  various  plants  where  these  plans  were  operated.  They 
studied  the  good  features  and  the  bad  features  and  dissected 
and  criticized  all  the  plans  very  thoroughly  and  finally  set 
themselves  to  the  task  of  creating  a  Goodyear  plan. 

"Publicity  was  given  out  on  all  actions  of  this  council 
and  each  of  their  meetings  was  reported  in  the  shop  paper, 
so  that  all  workers  in  the  factory  could  know  what  was 
going  on," 

In  this  manner  the  Goodyear  plan  was  formulated. 
The  third  "step  in  order"  was  to  get  the  plan  approved 
by  the  board  of  directors  and  by  the  "industrians" — 
employees  having  the  right  to  vote.  The  Council 
showed  its  good  judgment  by  giving  considerable  pub- 
licity in  the  factory  to  the  proposed  plan.  Every 
employee  got  a  copy  of  the  plan.  It  was  discussed  in 
the  shop,  explained.  Discussion  and  explanation  were 
the  major  topics  of  the  factory  paper.  The  board  of 
directors  of  the  company  acted  first  and  approved  the 
plan.  Ten  days  later  came  the  referendum  among  the 
industrians.  Only  eight  per  cent  of  those  voting  voted 
in  the  negative.  The  Council  then  appointed  an  Elec- 
tion Committee  to  supervise  the  nominations  and  elec- 
tions of  employee  representatives,  then  signed  the 
Constitution  and  adjourned  sine  die. 

The  Goodyear  people  have  appreciated  the  necessity 
of  extreme  care  in  the  manner  of  conducting  elections. 
The  elections  to  the  Industrial  Assembly  followed 
promptly.  The  Australian  ballot  system  was  used  this 
time  for  both  the  nomination  and  election  of  represen- 
tatives. The  factory  was  divided  into  forty  precincts 
and  ten  senatorial  districts.  Four  precincts  were 
grouped  to  make  a  senatorial  district.    One  representa- 


352  INDUSTRIAL  GOVERNMENT 

tive  was  to  be  elected  from  each  precinct,  and  two 
senators  from  each  senatorial  district.  Each  voter  in 
the  nomination  election  was  entitled  to  vote  for  two 
persons  for  representative  and  two  persons  for  sena- 
tor. Not  more  than  three  candidates  for  each  office 
were  placed  on  the  ballots.  At  the  regular  election  the 
industrian  had  his  choice  among  three  candidates  for 
representative,  and  his  choice  of  two  candidates  out 
of  six  for  the  Senate.  These  elections  are  conducted 
with  the  same  care  and  precautions  that  characterize 
our  political  elections.  The  elected  representatives  and 
senators  then  organized  the  two  houses  of  the  Good- 
year Industrial  Assembly.  This  completed  the  fourth 
and  last  "step"  in  instituting  employee  representation 
in  this  factory. 

Another  large  firm  proceeded  in  the  following  man- 
ner to  set  up  its  Industrial  Representation  plan: 

A.  A  committee  representing  equally  the  workers 
and  the  management  was  sent  out  to  visit  a  number  of 
representative  plans  in  operation.  The  committee 
noted  the  successes  and  shortcomings  of  these  plans, 
the  character  of  the  industry  in  each  case  and  the  racial 
composition  and  the  spirit  of  the  workers.  The  com- 
mittee made  its  report  to  the  Industrial  Representative 
and  was  then  dismissed. 

B.  A  second  committee  was  then  selected,  with 
equal  representation  for  management  and  workers, 
for  the  purpose  of  formulating  a  plan  for  their  shop. 
This  committee  studied  first  the  observations,  descrip- 
tions, and  recommendations  embodied  in  the  report  of 
the  first  committee,  then  studied  the  conditions  in  the 
factory,    and   prepared   a   plan   which   they    thought 


EMPLOYEE  REPRESENTATION        353 

squared  with  experience  elsewhere   and  was,   at   the 
same  time,  adapted  to  their  own  situation. 

C.  The  plan  was  then  submitted  to  a  vote  of  the 
workers  and  was  accepted.  A  majority  vote  was  re- 
quired for  approval. 

D.  In  accordance  with  the  plan,  the  workers  in 
each  voting  division  chose  their  own  committee  to 
conduct  the  elections  for  representatives. 

The  Labor  Agreements  between  the  Metal  Trades 
Department  of  the  American  Federation  of  Labor  on 
the  one  side  and  the  Bethlehem  Shipbuilding  Corpora- 
tion and  the  American  Shipbuilding  Company  on  the 
other  side  are  examples  of  the  articulation  of  employee 
representation  with  trade  unionism.  Take  for  ex- 
ample the  Bethlehem  plan.  By  decree  of  the  War 
Labor  Board  a  shop  committee  system  had  been  estab- 
lished, which  excluded  union  recognition.  The  repre- 
sentatives were  elected  on  a  numerical  basis.  Crafts 
were  ignored.  When  the  war  ended  the  company  was 
faced  with  the  question  of  union  recognition.  The 
award  would  soon  expire  and  to  attempt  to  continue 
without  an  agreement  meant  a  conflict  with  the  trade 
unions.  The  company  decided  to  deal  with  the  unions 
collectively. 

With  but  slight  modifications  the  same  method  was 
used  in  revising  the  War  Labor  Board's  committee 
system  in  the  plants  of  the  American  Shipbuilding 
Company. 

To  consummate  such  an  agreement  the  unions  that 
compose  the  Metal  Trades  Department  authorized  the 
officials  of  the  Department  "to  enter  into  an  agree- 
ment with  the  Company  providing  for  the  relations  of 
employees  aftiliated  with  said  unions  and  employed  by 


354  INDUSTRIAL  GOVERNMENT 

the  Company."  ^    The  agreement  between  the  company 
and  the  department  provided,  that: 

1.  The  unions  affiliated  with  the  department  select  a  com- 
mittee of  five  members,  to  be  called  "The  Internationals' 
Committee";  the  company  appoint  a  committee  of  five,  to 
be  called  the  "Company's  Committee." 

2.  "The  employees  will  select  local  or  plant  committees 
that  will  function  in  the  same  manner  as  provided  for  in 
the  Shipbuilding  Labor  Adjustment  Board  Awards,  subject 
to  such  changes  or  modifications  as  may  from  time  to  time 
be  agreed  upon  by  the  Internationals'  Committee  and  the 
Company's  Committee." 

3.  The  adjustment  of  all  questions  affecting  wages,  hours, 
working  conditions,  or  grievances  shall  be  first  attempted 
by  the  local  or  plant  committees. 

4.  The  Internationals'  Committee  and  the  Company's  Com- 
mittee sitting  as  a  joint  committee  shall  consider  all  ques- 
tions that  failed  of  adjustment  in  the  lower  committees. 

Six  weeks  later  this  general  joint  committee  of  com- 
pany and  union  adopted  the  rules  and  procedure  for 
carrying  out  the  agreement.  The  big  problem  was  the 
revision  of  the  old  shop  committee  system  to  harmon- 
ize with  the  structure  of  the  unions.  It  was  agreed 
that  craft  committees  should  be  substituted  for  the 
existing  series  of  joint  committees.  Each  craft  com- 
mittee was  to  be  composed  of  three  members,  while  the 
Internationals'  Committee  was  to  determine  how  many 
of  such  craft  committees  were  to  be  formed.  Each 
craft  committee  elected  a  chairman.  The  chairman  of 
the  craft  committees  compose  the  new  Plant  Commit- 
tee. All  questions  that  concern  but  one  craft  are  dealt 
with  by  that  craft's  committee.  There  are  no  joint 
committees,  under  the  new  plan,  in  the  shop.  The 
*  Agreement   with   American   Shipbuilding   Company. 


EMPLOYEE  REPRESENTATION        355 

committee  takes  its  grievances  first  to  the  foreman, 
and  failing  there  they  meet  the  management's  repre- 
sentative. If  there  is  still  a  failure  to  adjust  the  diffi- 
culty, the  President  of  the  international  craft  union 
sends  in  a  delegate  to  aid  the  craft  committee  in  further 
negotiations  with  the  company.  If  there  is  still  no 
agreement,  the  case  goes  to  a  joint  session  of  the  Inter- 
nationals' Committee  and  Company's  Committee. 
Questions  that  concern  more  than  one  craft  come 
before  the  Plant  Committee.  The  procedure  and  line 
of  appeals  are  the  same  as  those  already  outlined  for 
the  craft  committee. 

A  unique  method  of  introducing  employee  represen- 
tation is  that  used  by  the  employees  of  the  Dennison 
Manufacturing  Company  (Chapter  VI).  In  this  case 
the  employees  took  the  initiative,  formulated  their 
plan,  and  submitted  it  for  the  approval  of  the  company. 
We  have  asked  the  employees  who  had  this  matter  in 
charge  to  outline  their  method  of  procedure.  They 
have  submitted  the  following  statement : 

"In  order  to  understand  the  evolution  of  the  Dennison 
Manufacturing  Company  Works  Committee,  it  is  first  nec- 
essary to  have  a  slight  knowledge  of  the  construction  of 
the  plant.  The  factory  is  divided  into  several  divisions 
each  under  the  supervision  of  a  Division  Superintendent. 
These  divisions  are  divided  into  departments,  each  depart- 
ment taking  care  of  its  own  kind  of  work.  Each  department 
has  its  own  foreman. 

"The  employees  of  the  Framingham  plant  number  about 
2600  and  consist  of  about  an  equal  number  of  men  and 
women.  Twenty  per  cent  of  the  employees  are  members  of 
trade  organizations;  fifty  per  cent  of  the  employees  have 
been  with  the  company  five  years  or  over. 

"Early  in  the  month  of  July,  1919,  a  flyer  was  distributed 


356  INDUSTRIAL  GOVERNMENT 

by  the  Management  to  the  employees  announcing  the  calling 
of  a  mass  meeting  of  the  employees  to  discuss  the  question 
of  Works  Committee.  This  flyer  contained  a  statement  of 
some  of  the  possibilities  of  a  Works  Committee  in  order  to 
help  the  discussion  and  particularly  impressed  on  all  that 
the  discussion  at  the  mass  meeting  was  expected  to  be  abso- 
lutely free  from  all  angles. 

"This  announcement  created  great  agitation  in  the  plant. 
It  was  the  great  topic  of  discussion  and  a  various  number 
of  impressions  were  formed,  some  of  indifference,  some 
of  skepticism,  and  a  great  deal  of  expectation.  The  pre- 
vailing idea  among  the  employees  at  that  time  was  that 
a  Works  Committee  was  a  plan  to  prevent  affiliation  with 
trade  unions.  It  was  not  until  after  the  employee  representa- 
tives had  drawn  up  the  plan  in  which  it  was  made  very 
plain  that  it  had  absolutely  no  interference  with  trade  unions 
that  many  of  the  workers  commenced  to  be  interested. 

"The  War  Industries  Committee  acted  as  a  Ways  and 
Means  Committee  until  the  Works  Committee  was  finally 
launched. 

"On  July  2nd,  the  mass  meeting  took  place  in  the  yard 
between  the  buildings  and  about  eighty  per  cent  of  the  em- 
ployees were  present.  The  meeting  opened  with  a  short 
address  by  the  president  of  the  company,  stating  the  ob- 
ject of  the  meeting  and  inviting  an  absolutely  free  discus- 
sion of  the  question.  After  the  newness  of  the  situation 
wore  away,  there  was  quite  a  general  discourse.  The  meet- 
ing was  finally  adjourned  after  it  was  voted  by  a  majority 
to  have  a  committee  elected  by  the  employees  according  to 
departments  to  look  into  the  subject  of  Works  Committee, 
and  to  bring  in  recommendations  for  the  formation  of  a 
Works  Committee  in  the  Dennison  Manufacturing  Com- 
pany. The  conduct  of  this  election  was  put  in  the  hands  of 
the  War  Industries  Committee — a  committee  of  employees 
previously  created  to  assist  in  putting  the  plant  on  a  war 
basis. 

"After  an  allotment  of  representatives  according  to  de- 
partments was  made  by  a  committee  appointed  by  the  man- 


EMPLOYEE  REPRESENTATION        357 

agement,  on  July  14th  an  election  by  secret  ballot  was  held 
and  the  person  receiving  the  largest  number  of  votes  in 
each  department  was  designated  as  the  representative  of 
their  particular  department. 

"On  July  i8th  this  committee,  which  numbered  fifty-four 
men  and  women,  met  in  a  place  provided  by  the  manage- 
ment. This  gathering  of  representatives  was  started  on 
its  task  by  an  address  of  confidence  by  Mr.  Henry  Dennison, 
President  of  the  company.  He  spoke  briefly  on  the  object 
of  a  Works  Committee  and  offered  them  any  assistance  they 
might  desire  financially  or  any  other  assistance  possible 
in  the  solving  of  problems  which  they  had  before  them. 
He  then  started  the  organization  by  the  election  of  a  Chair- 
man and  from  then  on  the  committee  was  left  to  shape  its 
own  destiny. 

"After  organization,  a  general  discussion  ensued  in  re- 
gard to  the  different  phases  of  Works  Committees.  Realiz- 
ing that  the  committee  as  a  whole  had  a  very  hazy  idea  of 
the  question,  it  was  voted  to  adjourn  to  a  future  date,  so 
that  the  gathering  would  have  a  better  opportunity  to  study 
the  subject  before  voicing  a  further  opinion  in  the  matter. 
Each  went  away  with  literature  on  the  subject  provided  by 
the  management. 

"The  second  meeting  took  place  July  29th.  The  members 
had  gained  some  knowledge  and  were  ready  for  a  more 
intelligent  discussion.  An  endeavor  was  made  at  this  meet- 
ing to  start  the  plan  on  the  way  and  several  articles  were 
agreed  on  after  debating  each  article  pro  and  con.  Fear- 
ing to  consume  too  much  time  at  a  sitting  the  meeting  was 
adjourned  after  a  session  of  about  two  and  one-half  hours. 

"August  5th  found  us  together  again  and  the  work  was 
taken  up  again  in  the  same  way.  Before  the  meeting  was 
over,  it  was  decided  that  the  first  big  proposition  was  the 
districting  of  the  plant  and  the  allotment  of  representation. 
A  sub-committee  was  appointed  to  take  care   of  this  job. 

"At  the  next  and  fourth  meeting,  August  12th,  this  sub- 
committee reported  and  brought  in  the  following  plan  which 
was  accepted.     The  plant  was  divided  into  twelve  districts, 


358  INDUSTRIAL  GOVERNMENT 

including  the  Worcester  plant  employing  about  200  people. 
These  divisions  consisted  as  near  as  possible  of  200  em- 
ployees, each  division  containing  the  allied  branches  of 
work.  The  allotment  of  representatives  was  made  accord- 
ing to  occupations,  trades,  and  departments.  The  work  of 
this  small  sub-committee  brought  pressure  to  bear  on  the 
fallacy  of  such  a  large  committee  as  the  entire  recommenda- 
tion committee  trying  to  formulate  a  definite  scheme  of 
operation,  and  a  sub-committee  of  seven  was  appointed  to 
delve  more  deeply  into  the  subject  and  bring  in  some  well- 
thought-out  scheme  of  operation,  based  on  the  discussion 
of  the  large   committee. 

"Immediately  the  sub-committee  set  to  work  and  at  the 
next  and  fifth  meeting  brought  in  a  partial  report  which 
was  then  thrashed  out  and  amended  to  better  advantage  by 
the  committee  as  a  whole. 

"Fourteen  days  after  the  sub-committee  was  appointed  it 
had  the  constitution  and  by-laws  ready  for  final  considera- 
tion of  the  whole  committee.  The  plan,  with  a  few  altera- 
tions, was  then  passed  at  the  sixth  meeting,  August  29th, 
and  the  sub-committee  was  instructed  to  engross  the  plan 
for  presentation  to  the  employees  in  general  and  to  the 
management.  The  engrossed  plan  was  accepted  by  the 
Recommendation  Committee  at  its  seventh  and  last  meeting, 
September  4th. 

"The  plan  was  then  presented  to  the  management  for 
their  approval  and  was  accepted  by  them  with  no  altera- 
tions. Booklets  of  the  plan  and  recommendations  of  the 
committee  were  then  printed  and  distributed  to  the  em- 
ployees and  a  mass  meeting  called  September  i8th,  at  which 
the  plan  was  accepted  by  the  employees  in  general,  with  but 
very  few  minor  amendments. 

"As  soon  as  permissible  after  the  mass  meeting,  the  Cen- 
tral Committee,  as  called  for  in  the  plan,  was  elected  and 
our  Works  Committee  held  its  first  meeting  September  23rd 
and  organized  as  a  full  fledged  Works  Committee,  ready  to 
cope  with  any  proposition  brought  before  it  by  either  the 
employees  or  the  management." 


EMPLOYEE  REPRESENTATION        359 

The  management  must  not  forget  the  foremen  after 
the  plan  is  introduced.  There  must  be  opportunity  for 
them  to  meet  and  to  find  out  and  discuss  what  is 
going  on.  The  contact  of  the  management  with  the 
foremen  should  be  as  regular  and'  as  frequent  as  with 
the  workers.  In  the  Leitch  system  the  mistake  was 
made  of  making  the  foremen  and  other  executives  a 
link  in  the  governmental  system  between  company  and 
workers.  Foremen  and  workers  get  enough  contact 
with  each  other  in  the  shop.  There  does  not  seem  to 
be  any  real  need  for  further  provision  in  the  indus- 
trial representation  plan.  But,  on  the  other  hand,  the 
management  needs  to  take  the  foremen  into  its  counsels 
and  confidence.  A  paper  manufacturer  meets  with 
his  foremen  every  week  to  counsel  and  cooperate  for 
the  success  of  their  plan.  The  foremen  are  a  part  of 
the  management  and  their  participation  in  the  shop 
councils  should  be  limited  to  the  managerial  side.  They 
may  well  be  an  organized  element  within  the  manage- 
ment. 

The  mistake  should  not  be  made  of  regarding  the 
constitution  and  the  machinery  set  up  to  carry  out  its 
provisions  as  something  sacred  and  an  end  in  itself. 
If  there  is  anything  to  be  venerated  it  is  the  successful 
attainment  of  the  purposes  in  view.  Experience  will 
dictate  changes,  and  these  should  be  made  promptly. 
Especially  in  the  beginning  should  both  sides  keep 
alert  as  to  modifications  that  will  improve  the  plan. 

Governments  are  a  growth — usually  a  growth  out 
of  lively  participation  in  affairs  by  the  classes  involved. 
It  is  quite  generally  conceded  today  that  the  best  gov- 
ernments, the  most  practical  and  satisfactory,  are  those 
which  are  the  products  of  such  participations.     The 


36o  INDUSTRIAL  GOVERNMENT 

stress  of  experience  is  a  wonderful  adapter.  Industrial 
governments,  therefore,  should  be  as  practical  as  pos- 
sible at  all  times. 

Someone  has  asked  these  questions :  ( i )  To  what 
extent  and  how  quickly  should  the  employees  be  given 
control  over  the  business?  and  (2)  What  safeguards 
should  an  employer  set  up?  and  (3)  What  pitfalls 
should  he  avoid  in  order  to  prevent  his  industrial  ex- 
perimentation from  wrecking  his  business  ? 

No  categorical  answer  can  be  given  to  questions  of 
this  kind.  The  answer  depends  upon  the  character  and 
ability  of  the  employer  on  the  one  side  and  of  the 
employees  on  the  other  side.  If  the  employer  has  a 
strong  personality  and  is  a  natural  and  capable  leader 
of  men,  the  more  control  he  entrusts  to  the  employees, 
the  more  cooperation  he  will  be  able  to  get  from  them. 
An  able  employer  ought  to  have  nothing  to  fear  from 
going  it  fifty-fifty  with  his  employees.  But,  of  course, 
this  is  assuming  capable  employees.  If  the  employees 
are  uneducated,  wholly  inexperienced  in  business  af- 
fairs, a  shifting  and  irresponsible  element,  or  alien  to 
the  language,  institutions,  and  customs  of  our  coun- 
try, then  the  employer,  no  matter  how  capable  he  may 
be,  has  a  problem  of  Americanization,  of  education, 
and  of  reformation  on  his  hands  before  he  can  expect 
any  reliable  cooperation  from  his  workers.  To  such  a 
class  of  employees  responsibility  should  come  very 
limited  in  scope  at  first,  and  no  extension  of  power 
should  be  granted  before  they  demonstrate  their  trust- 
worthiness and  capability. 

If  the  first  question  assumes  a  shop  organization 
already  in  operation,  then  the  answer  to  the  second 
and  third  will  depend  in  part  upon  the  amount  of  con- 


EMPLOYEE  REPRESENTATION        361 

trol  that  was  initially  given  to  the  employees.  Many  an 
employer  has  withheld  power  from  the  employee  rep- 
resentatives not  so  much  because  of  doubt  of  their 
ability  as  because  of  mistrust.  Such  an  attitude  on  the 
part  of  the  employer,  persisted  in,  has  strangled  a 
number  of  these  efforts  at  shop  government.  In  other 
•cases  the  employer  was  quick  to  see  that  his  misappre- 
hension was  not  well  founded,  and  the  limitations  were 
promptly  removed.  If  a  shop  committee  or  council 
is  not  to  be  permitted  'to  exercise  the  responsibilities 
•of  which  it  is  capable,  it  had  better  never  have  been 
called  into  existence.  Capable  employees  will  not  serve 
on  committees  or  councils  when  they  are  restricted  and 
suspected  and  when  opportunity  is  denied  them  to  deal 
with  problems  that  challenge  their  abilities.  It  is  not 
long  until  a  committee  or  council  thus  restricted  be- 
comes inactive  and  an  object  of  contempt. 

Granting  the  capability  of  the  employees,  they  should 
be  permitted  to  deal  with  all  the  problems  that  affect 
them.  There  is  no  necessity  for  passing  on  to  them 
problems  that  do  not  necessarily  concern  them.  The 
field  of  industrial  relations  within  the  shop  is  the  legiti- 
mate field  for  employee  participation.  Every  employer 
ought  to  know  what  are  the  fixed  obligations  of  his 
company.  If  his  company  is  a  corporation,  there  are 
certain  powers  and  responsibilities  specifically  vested  in 
the  board  of  directors.  No  employer  can  lawfully 
consent  to  compromise  or  circumvent  these  legally 
fixed  duties.  There  are,  furthermore,  certain  condi- 
tions of  business  survival,  of  which  the  employer  is 
better  aware  than  his  employees.  These  conditions  are 
the  prerequisites  of  industrial  progress  as  well  as  of 
business  survival,  and  it  is  therefore  in  the  public  in- 


362  INDUSTRIAL  GOVERNMENT 

terest  that  such  conditions  be  adequately  safeguarded. 
No  employer  can  honorably  connive  at  or  permit  the 
dissipation  of  the  industry. 

There  are  great  differences  in  industries.  Some  are 
simple  of  operation,  others  are  highly  technical.  The 
character  of  the  industry  is  another  factor  determining 
the  extent  and  rapidity  with  which  employees  can  be 
initiated  into  control. 

The  rapidity  with  which  employees  are  to  be  given 
control  depends,  then,  upon  three  obvious  factors : 

1.  The  capability  of  the  employees. 

2.  The  intricacies  of  the  business  on  both  its  technical 
and  financial  sides. 

3.  The  legally  fixed  obligations  and  responsibilities  of  the 
company. 

The  particular  safeguards  that  the  employer  should 
concern  himself  about  center  around  the  fixed  obliga- 
tions of  the  company  and  the  conditions  necessary  for 
the  survival  and  progress  of  the  industry.  The  capa- 
bility and  character  of  the  employees,  the  character 
of  the  industry,  and  the  ability  of  the  employer,  are 
all  elements  in  the  problem.  It  is  impossible  to  write 
a  recipe  for  such  a  compound.  We  put  this  question 
about  "safeguards"  to  the  Proctor  &  Gamble  Company. 
Their  reply  runs :  "There  is  certainly  no  royal  road  to 
the  so-called  Industrial  Democracy."  This  is  about 
the  most  that  can  be  said  at  the  present  time. 

Joint  industrial  governments  cannot  succeed  unless 
there  is  mutual  confidence  between  management  and 
workers.  If  it  is  the  employer  who  is  taking  the 
initiative,  he  should  keep  constantly  in  mind  that  this 
kind  of  a  move  implies  faith  in  the  proletariate.    If  he 


EMPLOYEE  REPRESENTATION        363 

undertakes  the  adventure  with  but  a  limited  faith  in  his 
employees,  he  will  soon  discover  that  they  resent  a 
fifty  per  cent  faith.  "Aye,  there's  the  rub."  It  would 
be  better  for  the  employer  if  he  could  proceed  slowly, 
feeling  the  way.  Yet  he  can  hardly  afford  to  be  slow 
about  it  in  this  period  of  intensified  unrest.  Nor  is 
it  good  policy  to  be  in  a  hurry,  for  the  employer  who 
steps  out  like  a  King  with  a  Royal  Proclamation  to 
announce  his  conversion  to  democracy  in  industry 
arouses  at  once  suspicion  and  scepticism  among  the 
workers.    This  is  the  second  rub. 

Extremists  in  both  the  capital  and  labor  groups  are 
agreed  upon  uncompromising  hostility  to  joint  indus- 
trial government.  Bourbon  and  Bolshevik  stand  at  the 
opposing  poles  of  human  thought  and  activity.  They 
both  agree  that  they  have  nothing  in  common.  The 
industrial  struggle  between  them  takes  on  the  character 
of  an  unending  dog  fight,  but  in  spite  of  this  they  hold 
in  common  a  deep  contempt  for  the  men  and  women 
who  stand  somewhere  in  between  the  extremes  trying 
to  reform,  construct  or  reconstruct  human  institutions 
and  relationships  in  order  that  civilization  may  continue 
as  a  going  concern.  Joint  industrial  government  is  an 
impossibility  with  such  extremists  as  Elbert  H.  Gary 
and  William  D.  Haywood.  In  our  harassing  the 
"Bolsheviks"  we  have  overlooked  the  very  significant 
fact  that  the  Bourbon  is  as  great  a  revolutionary  menace 
as  the  reddest  of  the  reds. 

It  is  important  that  the  employer  see  this  situation 
when  he  begins  contemplating  a  move  in  the  direction 
of  industrial  democracy.  If  this  employer  has  allowed 
the  newspapers  and  professional  "leg  pullers"  to  get 
him  excited  about  "reds"  and  "Bolsheviks,"  if  he  has 


364  INDUSTRIAL  GOVERNMENT 

lost  his  restraint  and  indulged  in  violent  denunciations, 
in  hurling  epithets  such  as  Bolshevik,  traitor,  free  lover, 
etc.,  if  he  has  gone  as  far  as  some  of  them  and  has 
outspokenly  advocated  the  firing-squad  treatment  for 
dissenters  and  domestic  troubles,  his  first  step  toward 
industrial  democracy  is  to  take  a  vacation,  to  cool  off 
and  cut  out  puerile  nonsense.  He  needs  to  be  born 
again  into  the  good  old  American  spirit  of  toleration. 
An  employer  has  everything  to  lose  and  nothing  to 
gain  by  undignified  "slopping  over."  Let  the  employer 
quietly  dismiss  all  his  spies  and  spotters  (if  he  has 
them)  months  before  he  begins  to  talk  about  a  "new 
day"  in  the  shop.  By  thus  removing  the  causes  of 
irritation  and  mistrust  he  will  pave  the  way  for  con- 
fidence and  cooperation  when  the  effort  is  put  forth 
to  establish  a  joint  shop  government. 


XXIII 

JOINT  CONTROL 

Jennie  McMullin  Turner 

In  October,  1919,  we  sent  out  a  questionnaire  to  the 
firms  we  had  visited,  asking  for  their  experience  in 
the  matter  of  per  capita  production  since  19 14.  The 
following  replies  were  received : 

Reply  No.   i    (Men  on  straight  day  rate.) 

"We  have  20,000  more  employees  than  in  1914,  and  we 
are  producing  only  a  few  hundred  units  (cars)  more  per 
day  now  than  we  did  then.  This  is  not  to  be  attributed  to 
lack  of  efficiency  on  the  part  of  employees,  but  is  due  to 
the  fact  that  we  are  running  a  great  many  more  operations 
now  than  in  1914  and  producing  some  things  which  we  did 
not  then  produce,  but  which  were  made  by  other  com- 
panies. 

"The  work  done  in  our  branches  today  is  practically  the 
same  as  that  done  in  1914,  and  the  efficiency  in  our  branches 
at  the  present  time  is  higher  than  ever  before.  We  are 
aware  of  the  fact,  here  at  the  Home  Office,  that  there  is  a 
certain  tendency  on  the  part  of  employees  to  slow  down  a 
bit,  but  on  the  whole  we  do  not  believe  it  has  been  to  as 
great  a  degree  as  has  been  experienced  in  other  concerns." 

Reply  No.  2.     (Men  on  straight  day  rate.) 

"The  character  of  our  product  has  changed  so  much 
since  1914  that  there  is  no  way  that  a  comparison  can  be 

365 


366  INDUSTRIAL  GOVERNMENT 

made  such  as  you  mention.  Not  only  this,  but  the  shoes 
that  we  are  making  now  are  very  much  different  from 
what  we  made  a  year  ago  and  the  shoes  we  made  a  year 
ago  were  very  much  different  from  those  we  made  the  year 
before.  Our  product  has  been  undergoing  a  gradual  change 
since  we  started  business,  making  a  higher  grade  shoe  all 
the  time. 

"While  it  is  true  that  we  are  not  running  as  many  hours 
as  we  did  in  1914  and  it  is  also  true  that  we  do  not  get  the 
quantity  of  work  from  the  operator  that  we  did  then,  I 
believe  that  the  average  efficiency  of  the  operator  has  in- 
creased very  much.  In  other  words,  I  believe  that  he  is 
working  more  conscientiously  than  he  did  in  1914. 

"There  are  two  places  in  the  factory  where  the  character 
of  the  work  has  not  changed  a  great  deal.  That  is  in  the 
upper  cutting  room  and  the  sole  cutting  room.  In  both  of 
these  places  we  are  getting  more  work  per  hour  than  we 
ever  did  before.  There  is  only  one  reason  for  these  things 
and  that  is  that  we  have  today  to  a  much  larger  extent 
the  good  will  of  our  workmen  and  I  know  that  every  ex- 
ecutive in  our  factory  will  agree  that  we  have  less  soldier- 
ing in  the  job  today  than  we  ever  had  before  in  the  ex- 
perience of  our  business." 

Reply  No.  3.     (Employees  on  piece  rate.) 

"In  1914  the  average  hourly  production  of  tags  per  em- 
ployee was  100.  In  1918  it  had  dropped  to  90.  In  1919 
it  was  up  again  at  112.  The  great  increase  in  1919  over 
1914  is  due  chiefly  to  improved  methods  of  supervision." 

Reply  No.  4.     (Employees  on  straight  day  rate.) 

"I  am  finding  a  very  general  feeling  among  manufacturers 
to  the  effect  that  employees  everywhere  are  letting  up  in 
their  work  as  compared  with  1914.  We  are  receiving  very 
hearty  support  from  our  employees'  representatives  in  com- 
batting such  a  tendency  that  may  develop  among  our  work- 
ing force." 


JOINT  CONTROL  367 

Reply  No.  5. 

"Pieceworkers  and  workers  in  rubber  factory  have  in- 
creased about  50%  since  1914.  Common  labor  and  mem- 
bers of  building  trades  have  fallen  off  about  50% ;  brick- 
layers and  carpenters  50%." 

Reply  No.  6.     (Employees  on  straight  day  wage.) 

"The  average  per  capita  output  of  our  employees  has  in- 
creased 111%  since  1914." 

The  National  Association  of  Credit  Men  have  made 
an  investigation  of  the  present  efficiency  of  labor. 
Their  report  says : 

"Replies  were  received  from  169  manufacturers  located 
in  all  sections  of  the  country,  and  an  analysis  of  the  an- 
swers led  the  author,  Dr.  Whyte,  to  conclude  first,  that 
there  is  a  good  deal  of  exaggeration  in  the  oft-repeated 
statement  that  labor  in  this  country  is  only  50  or  60  per 
cent  as  efficient  as  it  was  before  the  war,  and  second,  that 
the  year  1920  is  so  far  showing  an  increase  in  efficiency. 

"In  reply  to  the  question,  'Is  your  labor  more  efficient 
now  (March,  1920)  than  it  was  three  months  ago  (Decem- 
ber, 1919),  57,  or  34  per  cent  of  the  167  firms  replying 
reported  an  increase  in  efficiency;  ^2,  or  43  per  cent,  re- 
ported no  improvement;  and  10,  or  6  per  cent,  reported  a 
decrease  in  efficiency,  while  18  companies  thought  that, 
although  there  was  no  improvement  shown,  labor  was  as 
efficient  as  in  pre-war  times,  and  10  stated  that  old  labor 
showed  as  much  efficiency  as  in  the  pre-war  times  but  that 
new  labor  was  inefficient.  Since  more  than  one-third  of 
these  firms  believed  that  conditions  in  this  respect  had  im- 
proved, as  against  6  per  cent  who  reported  a  reduction  in 
efficiency,  altogether  an  increase  of  production  for  the  three 
month  period  was  shown. 

"On  the  other  hand,  the  replies  to  the  question  comparing 
the  present  with  the  so-called  normal  period  (1913-14) 
show  that  production  is  not  yet  up  to  the  pre-war  standard. 


368  INDUSTRIAL  GOVERNMENT 

Seventy  per  cent  of  the  169  companies  answering  this  ques- 
tion stated  that  they  did  not  believe  that  labor  is  as  efficient 
now  as  it  was  in  1913-14.  Thirteen  of  these  attempted  to 
make  a  percentage  comparison  which  when  averaged 
showed  a  relative  efficiency  at  present  of  73  per  cent,  and 
while  the  number  reporting  was  too  small  to  form  a  general 
estimate  it  was  considered  that  it  refutes  in  a  measure  the 
charge  that  the  relative  degree  of  efficiency  reaches  as  low 
a  point  as  50  or  60  per  cent.  Twenty-seven,  or  16  per 
cent,  believed  that  labor  is  as  efficient  now  as  formerly, 
but  only  three  per  cent  considered  that  efficiency  has  reached 
a  standard  beyond  that  of  normal  times. 

"The  reasons  assigned  for  lowered  production  show  that 
a  large  number  of  employers  attribute  it  to  labor  shortage. 
The  causes  next  in  order  of  importance  are  given  as  in- 
dustrial unrest,  high  rate  of  labor  turnover,  high  wages, 
reaction  from  the  war,  and  high  cost  of  living,  while  in  a 
few  instances  the  blame  was  laid  upon  organized  labor,  the 
high  wages  paid  by  the  Federal  government  during  the 
war." ' 

Some  of  the  employers  we  visited  kept  careful  sta- 
tistics of  per  capita  output.  Their  testimony  is  there- 
fore more  reliable  than  the  sweeping  statements  we 
sometimes  see  in  the  newspapers.  We  can  probably 
place  little  reliance  upon  general  statements  concerning 
output  by  either  employers  or  employees,  unless  the 
statements  are  accompanied  by  figures.  At  a  recent 
conference  of  representative  employers  and  employees 
in  the  state  of  Wisconsin,  at  which  four  employers 
were  present,  the  latter  were  asked  if  they  could  fur- 
nish figures  showing  their  average  per  capita  produc- 
tion. Each  one  of  the  four  asserted  that  he  was  keep- 
ing no  such  figures  and  that  he  knew  of  no  employer  in 
the  state  who  could  furnish  such  information. 

*  "Efficiency  of  Labor  Increasing."  U.  S.  Bureau  of  Labor 
Statistics,  Monthly  Labor  Review.    June,  1920,  p.  219. 


JOINT  CONTROL  369 

If  these  employers  were  correct  in  their  beHef  that 
no  such  statistics  are  available,  and  if  this  Wisconsin 
experience  is  indicative  of  conditions  in  other  states, 
then  much  of  the  criticism  of  labor  must  be  admitted 
to  be  based  upon  general  impressions. 

But  whether  per  capita  production  is  increasing  or 
decreasing  at  any  particular  time,  the  productive  power 
of  labor  could  probably  be  greatly  increased  by  the 
recognition  of  a  few  significant  principles  in  industry. 
These  principles  are  to  be  found,  not  in  the  spoken  and 
written  literature  of  economists  and  experts,  but  in 
opinions  of  the  workingman  himself  when  he  feels  free 
to  speak  his  mind.  The  best  place  to  find  them  is, 
therefore,  the  labor  press. 

The  labor  press  is  necessarily  the  organized  labor 
press.  Unorganized  labor  has  not  and  can  not  have 
any  effective  means  of  expressing  its  opinions  on  in- 
dustry. Unfortunately  many  employers  shut  them- 
selves off  from  this  reliable  source  of  information,  the 
labor  press,  in  the  mistaken  belief  that  when  a  man 
joins  a  union  he  changes  his  views  and  no  longer 
speaks  for  the  unorganized  mass. 

A  careful  study  and  analysis  of  this  kind  of  litera- 
ture and  of  labor  phenomena  for  the  last  five  years, 
leads  us  to  the  conclusion  that  labor  conditions  its 
whole-hearted  contribution  to  production  on  four 
main  items :  ( i )  the  form  of  management  of  industry, 
(2)  the  fairness  of  the  distribution  of  the  proceeds 
from  the  sale  of  the  product,  (3)  the  possession  by 
labor  of  a  fair  share  of  power  over  both  production 
and  distribution,  and  (4)  the  right  kind  of  education. 

The  philosophy  of  labor  on  the  question  of  produc- 


370  INDUSTRIAL  GOVERNMENT 

tion  is  summed  up  in  the  Reconstruction  Report  of  the 
Wisconsin  State  Federation  of  Labor: 

"The  worker  must  share  the  responsibility  in  the  ad- 
ministration of  government.  He  is  under  an  equal  obliga- 
tion to  share  in  the  burdens  of  administration  of  industry. 
We  referred  earlier  to  increased  production  as  one  of  the 
elements  involved  in  the  raising  of  wages.  We  believe 
that  greater  production  ought  to  be  the  basis  of  increased 
happiness.  Many  of  us  would  like  to  have  more  to  eat  and 
wear;  most  of  us  would  like  to  have  better  homes,  better 
surroundings,  more  opportunities  for  recreation,  travel  and 
study.  Can  we  produce  enough  so  that  the  things  now 
enjoyed  by  only  a  few  will  in  the  future  be  sufificient  for 
all?     Can  we  do  it  without  injury  to  the  worker? 

"We  cannot  do  it  without  a  reorganization  of  industry, 
which,  though  gradual,  must  be  thorough.  We  cannot  do 
it  as  long  as  men,  women  and  children  are  permitted  to 
undermine  their  strength  through  long  hours  of  toil;  so 
long  as  they  are  permitted  to  be  idle,  when  they  have  pro- 
duced for  the  profit  of  an  individual  so  much  of  an  article 
that  their  services  are  no  longer  needed.  We  cannot  do  it 
so  long  as  children  are  permitted  to  leave  school  and  go 
to  work  before  they  have  found  the  work  or  have  been 
trained  for  the  work  for  which  they  are  best  fitted.  We 
cannot  do  it  so  long  as  workers  are  in  fear  of  the  introduc- 
tion of  improved  machinery  and  resist  it  because  they  realize 
that  instead  of  giving  them  a  better  living  it  will  take  away 
from  them  the  meager  living  they  already  have. 

"The  standard  of  living  can  be  raised  to  the  highest  pos- 
sible level  only  when  the  workers  so  control  industry  that 
increase  in  production  brings  better  living  for  all,  instead 
of  increased  luxury  for  a  few  and  unemployment  and  pov- 
erty for  many."  ^ 

The  American  Federation  of  Labor  at  its  annual 

*  "Next  Steps  for  Wisconsin.  A  Program  of  Construction," 
Milwaukee,  1918. 


JOINT  CONTROL  371 

convention  in  1920  held  at  Montreal  adopted  a  pro- 
gram which  expressed  the  same  ideas : 

"Industry  to-day  requires  these  remedial  measures: 

"It  requires  greater  democracy  in  order  to  give  to  the 
workers   full   voice   in   assisting  in   its   direction. 

"It  requires  more  intelligent  management  and  acceptance 
of  the  principle  that  production  is  for  use  and  not  for  profit 
alone. 

"It  requires  full  and  free  acceptance  and  use  of  the  best 
that  invention  has  to  offer. 

"It  requires  bold  and  audacious  reconstruction  of  method 
and  process  in  the  conduct  of  basic  industries. 

"Labor  does  not  oppose  introduction  of  improved  methods 
in  industry.  It  courts  and  encourages  improvements  in 
processes  and  in  machinery.  What  it  will  always  resist  is 
the  introduction  of  these  processes  and  this  machinery  at 
the  expense  of  the  workers. 

"There  is  a  knowledge  of  industry  among  the  workers  in 
industry  of  which  society  has  not  begun  to  avail  itself.  The 
effort  has  been  to  suppress  use  of  that  knowledge  and  to 
demean  those  who  possess  it.  The  workers  know  their  work 
as  none  but  the  workers  can  know  it.  The  shoemaker  knows 
his  last  and  the  engineer  understands  the  capacity  of  his 
engine. 

"The  workers  are  appalled  at  the  waste  and  ignorance  of 
management,  but  they  are  too  frequently  denied  the  chance 
to  offer  their  knowledge   for  use. 

"They  decline  to  be  enslaved  by  the  use  of  their  own 
knowledge  and  they  cannot  give  of  it  freely  or  effectively 
except  as  equals  in  industry,  with  all  of  the  rights  and 
privileges  and  with  all  of  the  stature  and  standing  of  em- 
ployers. 

"Adoption  of  the  principle  of  voluntary  effort,  of  full 
cooperation  in  industry,  will  bring  to  the  industrial  life  of 
the  Nation  such  an  impetus  that  production  will  cease  forever 
to  be  a  problem  in  American  life. 

"Adoption  of  the  principles  we  here  urge  will  inevitably 
result  in  a  rapid  decrease  of  the  number  of  nonproducers 


372  INDUSTRIAL  GOVERNMENT 

who  at  present  live  by  fastening  themselves  in  one  useless 
capacity  or  another  upon  the  industrial  life  of  the  country. 
Proper  absorption  of  non-producers  into  useful  channels 
would  be  but  a  simple  problem. 

"The  welfare  of  the  workers  must  be  a  paramount  con- 
sideration. There  can  be  no  progress  and  no  gain  in  pro- 
duction volume  if  there  is  not  such  consideration.  But  a 
greater  mutuality  in  industry  would  insure  proper  safe- 
guarding of  the  rights  of  workers. 

"Only  by  such  methods  and  under  such  principles  can 
there  be  an  advance  in  production  which  does  not  penalize 
the  worker  for  his  own  industriousness  and  for  his  own 
alertness  and  inventiveness. 

"Autocratic  industry  kills  incentive.  It  punishes  bril- 
liancy of  attainment.  It  warps  the  mind  and  drains  the 
energy  from  the  body.  We  have  repeatedly  condemned  the 
principle  of  autocratic  control  of  industry,  and  we  now 
declare  that  short  of  its  complete  removal  from  our  in- 
dustrial life  there  is  no  industrial  salvation  and  no  hope  of 
abundance  in  our  time. 

"We  urge  the  setting  up  of  conference  boards  of  organ- 
ized workers  and  employers,  thoroughly  voluntary  in  char- 
acter and  in  thorough  accord  with  our  trade-union  organ- 
izations, as  means  of  promoting  the  democracy  of  industry 
through  development  of  cooperative  effort.  We  point  out 
to  employers  the  fact  that  industry,  which  is  the  life  blood 
of  our  civilization,  cannot  be  made  the  plaything  and  the 
pawn  of  a  few  who  by  chance  today  hold  control.  In- 
dustry is  the  thing  by  which  all  must  live,  and  it  must  be 
given  the  opportunity  to  function  at  its  best. 

"Labor  turnover  is  but  one  of  the  evils  which  will  dis- 
appear in  proportion  as  the  workers  are  given  voice  in  man- 
agement. This  is  proven  by  statistics  which  show  the  lowest 
turnover  in  those  industries  where  the  workers  exercise  the 
most  effective  voice  by  reason  of  the  highest  degree  of 
organization. 

"We  propose  the  salvation  of  industry.  We  propose  the 
means  whereby  the  world  may  be  fed  and  clothed  and 
housed  and  given  happiness.    We  have  service  to  give,  and 


JOINT  CONTROL  373 

if  permitted  to  give  freely  and  on  terms  of  manhood  and 
equality  we  will  give  in  abundance.  We  cannot  be  driven 
as  slaves,  but  we  can  give  mighty  service  in  a  common  effort 
of  humankind."  * 


MANAGEMENT 

The  idea  that  labor  should  share  the  burdens  of 
administration  is  comparatively  new.  The  old  attitude 
of  labor  was  one  of  indifference  to  the  effect  of  their 
demands  upon  industry.  "We  want  wages,"  they  used 
to  say.  "Where  are  they  to  come  from? — That's  the 
employer's  business.    Let  him  worry." 

Their  attitude  coincided  with  the  employer's  own 
feeling  in  the  matter, 

"My  business  is  my  own,  and  I  can  manage  it 
without  any  interference  from  my  employees  or  from 
the  public,"  is  a  sentiment  that  has  a  familiar  sound. 
But  when  he  has  managed  it  to  suit  himself  for  a  long 
time,  shutting  his  ears  to  the  complaints  and  the  sug- 
gestions of  employees,  fighting  every  attempt  by  the 
State  to  mitigate  the  bad  conditions  prevailing  in  his 
plant,  the  employer  has  sometimes  come  at  last  to  the 
point  where  his  employees  refuse  to  go  on  with  pro- 
duction. Sometimes  then  he  forgets  that  this  is  his 
business,  run  to  suit  himself.  He  appeals  to  the  public, 
whose  advice  he  formerly  despised,  to  protect  him  by 
injunctions,  by  police  and  by  moral  pressure  against 
his  erring  employees.  He  appeals  to  his  employees  to 
come  back  and  save  the  business.  He  is  eager  to  show 
them  what  before  he  considered  to  be  none  of  their 
business,  the  financial  conditions  which  make  it  impos- 

*U.  S.  Bureau  of  Labor  Statistics,  Monthly  Labor  Review, 
August,  1920,  pp.  168-169. 


374  INDUSTRIAL  GOVERNMENT 

sible  for  him  to  meet  their  demands.  He  would  gladly 
call  in  the  leaders  among  his  employees  to  see  if  their 
superior  intelligence  would  be  able  to  grasp  his  point 
of  view.  Then  he  finds  there  are  no  leaders  among 
them  who  have  any  great  influence  with  the  others,  no 
tried  and  trusted  men  disciplined  by  years  of  collec- 
tive bargaining  and  compromise.  He  himself  has  seen 
to  it  that  none  such  have  ever  developed. 

It  is  in  such  a  crisis  as  this  that  the  possible  con- 
tribution of  the  employees  to  management  sometimes 
appears.  It  was  out  of  such  a  crisis  as  this  at  the  firm 
of  Hart,  Schaffner  &  Marx  that  there  has  developed 
in  the  clothing  industry  a  machinery  which  makes  pos- 
sible such  a  contribution. 

Before  we  discuss  this  machinery  and  its  contribu- 
tion to  management,  we  need  to  study  the  industrial 
conditions  which  are  making  necessary  the  adoption  of 
a  new  science  of  management. 

As  industry  grows  in  size,  we  are  passing  out  of 
the  stage  when  management  was  identical  with  capital, 
into  the  stage  when  management  is  more  nearly  identi- 
cal with  labor — when  management  is  simply  a  body  of 
employees  hired  by  the  owners  of  capital  to  discipline 
and  supervise  the  work  of  the  other  employees.  The 
fact  that  the  members  of  the  managerial  force  are  fre- 
quently stockholders  in  the  corporation,  sometimes 
with  considerable  holdings,  does  not  alter  the  general 
employee-character  of  the  managerial  force,  which  de- 
pends for  its  livelihood,  not  primarily  upon  the  profits 
of  the  industry,  but  primarily  upon  fixed  wages. 

The  employee-manager  in  modern  industry  is  not 
in  a  particularly  enviable  position.  Forced  by  absentee 
owners  of  capital  to  find  dividends  for  them,  tormented 


JOINT  CONTROL  375 

by  his  fellow  wage-earners  for  wage  increases,  harried 
by  competitors,  dictated  by  bankers,  he  finds  himself 
in  the  position  of  a  statesman  who  knows  himself  what 
is  good  for  his  country,  but  who  has  no  solid  public 
opinion  back  of  him  to  enable  him  to  stand  out  against 
its  enemies. 

Who  are  the  enemies  of  industry?  That  depends 
upon  what  we  consider  the  purpose  of  industry. 

Many  people  have  the  idea  that  the  purpose  of  in- 
dustry is  production  of  goods.  Capital  is  inclined  to 
encourage  this  idea  when  by  doing  so  it  can  demon- 
strate the  iniquity  of  the  strike.  If  the  purpose  of 
industry  is  production  of  goods,  then  the  strike  is  di- 
rected against  the  public  which  uses  the  goods.  The 
stockholder  has  been  wont  to  represent  himself  as  the 
defender  of  the  public  against  the  delinquencies  of 
labor.  He  has  been  wont  to  shout  "Production !  More 
production!"  as  if  that  were  his  main  object  in  living 
and  in  investing  his  money. 

But  now  the  courts  come  along  and  strip  the  glamour 
of  public  benefactor  from  the  stockholder.  In  the 
case  of  Dodge  vs.  Ford  Motor  Co.  (170  N.  W.  668, 
1919.),  the  Supreme  Court  of  Michigan  tells  Henry 
Ford  that  benevolence  is  not  for  him  as  a  manager. 
Profits  for  the  shareholders,  not  production  for  the 
public  is  the  object  of  a  business  corporation.  "There 
should  be  no  confusion  (of  which  there  is  evidence)  of 
the  duties  which  Mr.  Ford  conceives  that  he  and  the 
stockholders  owe  to  the  general  public  and  the  duties 
which  in  law  he  and  his  co-directors  owe  to  protesting, 
minority  stockholders.  A  business  corporation  is  or- 
ganised and  carried  on  primarily  for  the  profit  of  the 


Zy^  INDUSTRIAL  GOVERNMENT 

stockholders}  The  powers  of  the  directors  are  to  be 
employed  for  that  end.  The  discretion  of  directors  is 
to  be  exercised  in  the  choice  of  means  to  attain  that 
end,  and  does  not  extend  to  a  change  in  the  end  itself, 
to  the  reduction  of  profits,  or  to  the  non-distribution 
of  profits  among  stockholders  in  order  to  devote  them 
to  other  purposes.  It  is  not  within  the  lawful  powers 
of  a  board  of  directors  to  shape  and  conduct  the  affairs 
of  a  corporation  for  the  merely  incidental  benefit  of 
shareholders  and  for  the  primary  purpose  of  benefiting 
others,  and  no  one  will  contend,  that  if  the  avowed 
purpose  of  the  defendant  directors  was  to  sacrifice  the 
interest  of  shareholders,  it  would  not  be  the  duty  of 
the  courts  to  interfere." 

According  to  this  decision,  industry  exists  primarily 
for  the  benefit  of  one  factor  of  production,  and  only 
incidentally  for  the  benefit  of  the  other  factors  and  of 
the  public.  Wages  of  labor  and  prices  of  products  are 
to  be  determined  solely  in  consideration  of  their  effect 
upon  profits. 

Management  being  now  responsible  only  to  capital 
must  determine  its  conduct  of  the  industrial  enterprise 
primarily  by  its  efifect  upon  profits.  If  high  wages 
and  low  prices  are  conducive  to  high  profits  manage- 
ment must  lend  its  efforts  toward  high  wages  and  low 
prices.  If  low  wages  and  high  prices  bring  high  profits, 
it  must  work  toward  low  wages  and  high  prices.  If 
greater  output  means  greater  profits  management  must 
try  to  secure  greater  output.  If  restriction  of  prod- 
ucts brings  greater  profits,  products  must  be  restricted. 
Management  must  produce  profits  rather  than  goods. 

According  to  this  philosophy,  we  are  today  totally 

^  Italics  are  the  author's. 


JOINT  CONTROL  377 

dependent  for  the  satisfaction  of  our  needs  upon  or- 
ganizations the  main  object  of  which  is  profit,  not 
production.  According  to  this,  under  the  present  joint 
stock  system  of  private  industry,  the  pubhc  cannot 
benefit  from  low  costs  unless  the  benefit  would  result 
in  high  profits. 

There  is  steadily  growing  everywhere  a  conviction 
that  this  philosophy  is  wrong,  that  production  is  the 
vital  thing  to  all;  that  industry  exists  primarily  for 
something  more  than  the  benefit  of  one  class  or  group. 
There  is  steadily  growing  this  notion  of  the  public 
purpose  of  industry  and  of  all  the  factors  in  industry, 
and  of  the  equal  interest  of  all  of  these  factors  and  of 
the  public  in  efficient  production. 

In  the  majority  of  cases,  machinery  for  the  control 
and  direction  of  industry  is  based  on  the  theory  of  the 
Dodge  decision,  that  capital  alone  selects  the  manage- 
ment, and  to  capital  alone  management  is  responsible. 
The  interest  of  the  other  factors  is  ignored.  Manage- 
ment must  answer  the  demands  of  labor  in  accordance 
with  the  interest  of  profits.  Labor  may  make  itself 
a  nuisance  when  its  demands  are  not  met,  but  manage- 
ment is  not  responsible  to  labor. 

But  as  industries  have  grown  in  size  to  the  dimen- 
sions of  small  cities,  management  is  coming  to  feel 
that  in  the  interest  of  profits,  there  is  one  duty  which 
it  can  no  longer  perform  efficiently  and  which  it  is 
willing  consequently  to  delegate  to  the  workers.  This 
is  the  function  of  discipline. 

Even  the  employer  who  is  the  most  hearty  exponent 
of  the  theory  of  the  independence  of  management  of 
both  labor  and  capital,  and  who  is  extremely  jealous 
of  the  prerogatives  of  management,  admits  that  he  uses 


378  INDUSTRIAL  GOVERNMENT 

the  shop  committee  "openly  and  purposely,  as  told  to 
them,  for  the  purpose  of  making  them  more  respon- 
sible for  those  things  known  as  shop  discipline,  shop 
service,  etc.,  which  they  can  accept  and  must  accept 
for  the  common  good,  and  when  they  do  accept  it,  they 
are  making  themselves  loo  per  cent  responsible  for  its 
enforcement."  ^ 

This  disciplinary  power  also  rests  with  the  employees 
at  Filene's  (Chapter  V),  though  here  it  is  joined  with 
policy  making  power.  In  many  union  or  preferential 
union  shops  disciplinary  regulations  are  likewise  estab- 
lished by  joint  agreement  or  consent. 

One  device  which  has  been  adopted  to  protect  man- 
agement against  labor  and  against  the  tendency  of 
labor  to  organize  against  the  power  of  capital  is  "scien- 
tific management."  By  employing  experts  to  study 
the  business  and  by  insisting  upon  the  infallibility  and 
scientific  nature  of  all  their  conclusions  and  arrange- 
ments, they  have  attempted  to  make  labor  accept  as 
infallible  the  order  of  things  which  is  found  to  be 
conducive  to  profits.  They  have  taken  refuge  in  the 
happy  theory  that  their  experts  are  searching  for  truth, 
and  that  when  the  truths  are  found,  it  is  the  duty  of  all 
to  conform. 

But  labor  is  not  a  good  conformist.  It  refuses  to 
accept  as  inspired  the  word  of  the  expert  chosen  by 
management.  To  labor,  management  itself  is  simply 
another  group  of  employees,  a  subservient  and  some- 
times rather  contemptible  group,  obedient  to  the  will  of 
the  absentee  stockholders  upon  whom  they  depend  for 

*  Richard  A.  Feiss,  Address  before  the  Economic  Club,  Bos- 
ton.   The  Consensus,  July,  1919. 


JOINT  CONTROL  379 

the  tenure  of  their  position,  and  acting  as  a  buffer  to 
protect  capital  against  the  demands  of  labor. 

The  study  of  labor  expressions  discloses  a  difference 
of  opinion  among  workers  as  to  the  methods  by  which 
democracy  in  management  is  to  be  obtained.  To  one 
group,  the  only  hope  appears  to  be  public  ownership 
and  management  by  the  state.  To  others,  the  solution 
is  management  and  ownership  by  all  the  employees. 
To  others  it  is  ownership  by  the  state  and  management 
by  the  state  and  all  employees  jointly.  The  Plumb 
Plan  for  railroad  administration  is  an  expression  of 
this  idea.  But  we  are  interested  here  chiefly  in  the 
ideas  of  those  who  believe  it  possible  to  bring  about 
the  four  conditions  under  which  labor  will  work  un- 
reservedly under  private  control  and  ownership  of 
industry.  Some  of  these  talk  of  membership  of  em- 
ployees on  the  boards  of  directors;  of  the  selection  of 
the  foreman  by  those  who  work  under  him,  and  the 
necessity  for  publicity  concerning  the  methods  of  man- 
agement. 

There  is  more  experimentation  along  these  various 
lines  than  is  ordinarily  suspected.  Filenes'  have  for 
years  had  representation  of  employees  on  their  board 
of  directors.  As  a  matter  of  policy,  the  wishes  of  the 
employees  are  often  consulted  when  a  department  head 
has  proved  unsatisfactory  and  a  new  one  is  found  to 
be  desirable.  In  one  place  we  visited,  the  employees 
by  threatening  strike  had  saved  a  popular  general 
manager  from  official  decapitation  by  the  absentee  di- 
rectors. In  a  certain  closed  union  shop,  while  there  is 
usually  no  formal  election  of  the  foreman,  the  latter 
must  nevertheless  be  acceptable  to  the  men.  The  King 
of  England  chooses  the  prime  minister,  but  his  choice 


38o  INDUSTRIAL  GOVERNMENT 

is  limited  to  one  man,  the  leader  of  the  party  which  is 
in  the  majority  in  the  House  of  Commons.  So  the 
company  chooses  the  foreman  in  the  closed  union  shop, 
but  the  foreman  must  be  one  who  has  the  good  will  of 
the  men.  No  management  can  be  truly  "scientific" 
which  expects  men  to  give  their  best  in  production 
under  the  direction  of  a  man  whom  they  dislike. 

The  expressions  of  organized  labor  on  these  vari- 
ous devices  for  introducing  some  degree  of  democracy 
into  the  management  of  private  industry  show  that 
labor  is  alive  to  the  danger  of  accepting  any  of  the^e 
responsibilities  in  its  present  state  of  organization. 
The  Wisconsin  State  Federation  of  Labor  went  on  rec- 
ord against  the  bill  introduced  in  the  Legislature  of 
19 19  to  require  an  employee  member  on  every  board 
of  directors.  They  insisted  that  one  lone  member  on 
such  a  board  would  be  either  a  dupe  or  a  cat's  paw 
of  the  company  unless  he  had  an  invincible  organiza- 
tion behind  him  to  help  direct  his  policy  and  to  hold 
him  responsible  for  his  acts.  Under  any  circumstances, 
one  labor  representative  would  be  at  a  disadvantage  in 
that  he  would  have  no  acceptable  witness  to  prove  his 
integrity  and  faithfulness  to  the  cause  of  his  constit- 
uents. They  felt  that  there  should  be  at  least  two 
employee  representatives  on  every  board.  There  was 
also  the  feeling  that  too  much  inside  knowledge  might 
discourage  employees  from  trying  to  improve  their 
conditions  at  the  expense  of  a  tottering  business,  and 
that  the  persistence  of  inefficiency  in  management  might 
thus  be  prolonged  by  labor's  fear  of  upsetting  the  in- 
dustry. There  were  many  individual  members  of 
organized  labor,  however,  who  believed  that  they 
should  seize  any  opportunity  to  get  the  inside  facts 


JOINT  CONTROL  ,381 

of  the  business  and  that  while  the  privilege  would  be 
of  no  value  to  unorganized  labor,  it  would  not  harm 
and  might  really  be  useful  to  organized  labor. 

But  while  workers  may  hesitate  to  allow  themselves 
to  be  saddled  formally  with  responsibility  for  the  ac- 
crued mistakes  of  the  management  of  privately  owned 
industry,  and  while  they  may  entertain  considerable 
differences  of  opinion  concerning  such  devices  as  rep- 
resentation on  the  board  of  directors  and  election  of 
foremen,  organized  labor,  wherever  it  is  allowed  to 
function,  is  steadily  contributing  to  the  science  of 
management. 

Suppose  that  in  every  industrial  or  commercial 
plant,  a  great  mirror  could  be  hung  which  would  so 
reflect  the  events  of  the  day  as  to  magnify  all  the 
strong  and  the  weak  points  in  administration.  That 
mirror  would  be  invaluable  to  the  management  in  check- 
ing up  its  own  defects. 

Such  a  mirror  has  been  provided  in  every  industry 
which  has  set  up  a  machinery  for  continuous  collec- 
tive bargaining  and  for  the  continuous  consideration 
of  grievances  and  disputes.  Among  the  most  impor- 
tant pieces  of  machinery  of  this  kind  are  the  Trade 
and  Arbitration  Boards  of  the  Men's  Clothing  industry 
(Chapters  XVI  and  XVII)  and  the  Board  of  Arbi- 
tration at  Filenes'  (  Chapter  V ) .  These  boards,  dealing 
as  they  do  day  after  day  with  all  the  dissensions  and 
dissatisfactions  in  factory  and  store,  can  scarcely  fail 
to  find  out  the  weaknesses  in  the  plant,  and  the  source 
of  trouble,  the  mistakes  and  frailties  of  management 
and  employees.  These  are  all  disclosed  in  the  questions 
which  come  up  over  making  and  keeping  the  wage 


382  INDUSTRIAL  GOVERNMENT 

agreement,  over  the  impoliteness  of  employees,  over 
dishonesty  and  over  standards  of  efficiency. 

The  criticism  has  sometimes  been  offered  of  the  sys- 
tem at  Hart,  Schaffner  &  Marx  that  it  offers  to  the 
employee  who  has  a  tendency  to  grumble,  a  constant 
temptation  to  relieve  himself  of  petty  complaints  which 
might  better  be  left  unexpressed,  and  which  tend  to 
become  exaggerated  in  the  telling.  There  are  two  an- 
swers to  this.  The  first  is,  that  these  petty  complaints 
often  are  the  key  to  the  real  inefficiencies  of  the  plant. 
Similar  and  frequent  complaints  from  a  certain  depart- 
ment or  by  a  certain  individual  frequently  lead  to  the 
location  of  a  trouble  center,  and  the  recommendation 
perhaps  of  the  removal  or  transfer  of  the  person  re- 
sponsible or  the  complete  reorganization  of  the  depart- 
ment. In  the  second  place,  the  constant  fear  of 
publicity  has  a  good  effect  on  manners.  The  knowledge 
that  everything  he  says  or  does  is  likely  to  come  up 
for  review  before  a  body  which  has  great  power  has 
a  strong  tendency  to  make  each  official  of  the  company 
attentive  to  his  duties  and  polite  to  his  subordinates. 
His  self-controlled  behavior,  in  turn,  has  a  good  effect 
upon  the  employees  under  his  direction,  and  goes  far 
to  secure  their  good  will  and  similar  self-control  and 
politeness.     All  this  is  not  lost  on  production. 

Management  cannot  afford  to  be  without  such  a 
mirror  of  its  strength  and  its  weakness  as  a  board  of 
this  kind  affords.  But  simply  setting  up  a  board  will 
not  accomplish  the  purpose.  Such  a  board  cannot  be 
made  to  reflect  truly  the  strength  and  the  weakness  of 
the  management  unless  complete  frankness  of  employ- 
ees before  the  board  is  secured.  This  is  secured  in 
the  case  of  Filenes'  by  the  knowledge  of  the  employees 


JOINT  CONTROL  383 

that  the  company  is  perfectly  willing  to  listen  to  criti- 
cism and  that  they  themselves  are  perfectly  safe  in 
offering  it.  It  is  secured  at  Hart,  Schafifner  &  Marx 
by  the  knowledge  that  the  union  is  strong  enough  to 
protect  its  members.  In  the  one  case,  it  is  the  will 
of  the  employer,  in  the  other  the  power  of  the  unions, 
which  makes  it  possible  for  the  employees  to  render 
this  great  service  to  management. 

It  requires  courage  for  management  to  accept  a 
check  like  this  upon  its  work.  There  are  still  com- 
paratively few  employers  who  have  dared  or  who  have 
been  forced  to  do  so.  The  majority  would  rather 
bury  their  heads  in  the  sand  and  imagine  that  every- 
thing they  do  is  right  than  to  meet  the  daily  criticism 
and  suggestions  of  the  men  whose  work  they  direct. 
Many  firms  which  have  established  joint  committees 
of  company  and  employees  have  not  dared  to  face  this 
criticism,  and  have  saved  themselves  by  restricting  the 
subjects  with  which  the  committees  can  deal.  In  one 
place  which  we  visited,  not  reported  in  these  chapters, 
the  superintendent  deliberately  ignored  the  existence  of 
the  representative  body  which  had  been  set  up,  and 
went  ahead  settling  every  complaint  himself.  As  the 
ordeal  of  facing  him  appeared  to  the  employees  to  be 
considerably  worse  than  most  of  the  hardships  of 
which  they  might  complain,  it  was  obvious  that  he  re- 
ceived very  little  light  on  the  way  his  employees  regard 
the  activities  of  himself  and  the  other  managerial  em- 
ployees. 

Our  conclusion,  then,  is  that  the  kind  of  management 
which  secures  the  best  production  from  labor  is  man- 
agement which  is  kept  closely  in  touch  with  labor 
through  machinery  which  forces  both  parties  through 


384  INDUSTRIAL  GOVERNMENT 

their  representatives  to  sit  together,  constantly  listening 
to  mutual  criticism,  and  to  discuss  constantly  the  prob- 
lems of  the  industry. 

DISTRIBUTION 

The  second  great  influence  upon  labor's  part  in  pro- 
duction is  the  distribution  of  the  earnings  among  the 
factors  of  production. 

Labor  literature  and  labor  tactics  demonstrate  that 
"labor"  is  growing  less  and  less  inclined  to  work  cheer- 
fully and  effectively  :  first,  when  it  knows  that  someone 
else  is  getting  the  lion's  share  of  the  product;  second, 
when  it  does  not  know  but  merely  suspects  that  some- 
one else  is  getting  the  lion's  share ;  and  third,  when  the 
terms  on  which  the  product  is  divided  among  the  fac- 
tors of  production  are  determined  by  one  or  more  of 
the  other  factors  with  labor  unconsulted. 

"More  production  means  more  profits  for  Coats" 
was  the  slogan  of  a  crowd  of  angry  men  and  women 
employees  outside  a  hall  in  the  city  of  Glasgow  to  picket 
the  meeting  of  the  stockholders  of  the  Coats  Thread 
Combine  called  to  declare  a  big  stock  dividend. 

The  American  worker  is  less  demonstrative  than  his 
English  brother  and  sister  but  he  feels  very  much  the 
same. 

"Through  the  whole  period  that  has  elapsed  since 
November  11,  1918,"  says  Mr.  Gompers,  ".  .  .  there 
has  been  an  abandon  and  ruthlessness  worthy  of  high 
seas  piracy.  Buccaneering  tactics  have  been  used  in 
the  conduct  and  management  of  industry  without  re- 
gard to  the  needs  of  society  and  to  the  needs  of  the 
workers.  .  .  .  Out  of  this  repression  and  out  of  this 


JOINT  CONTROL  385 

ruthless  exploitation  and  profiteering,  there  has  been 
bred  among  the  working  people  a  deep  and  stern  re- 
sentment." ^ 

"The  meek  shoe  clerk  who  tries  on  your  shoes,  .  .  . 
is  bitter  about  conditions  today.  When  he  sees  a 
woman  buy  seven  pairs  of  shoes  at  $20  a  pair,  while 
he  can  not  afford  good  milk  for  his  children  at  home, 
his  thoughts  turn  to  dangerous  channels."  ^ 

The  fact  that  labor  is  vociferous  in  its  outcry  against 
profiteering  does  not  in  itself  prove  that  labor  would 
work  harder  under  a  non-profiteering  system.  There 
are  few  firms,  moreover,  which  afford  the  opportunity 
to  watch  the  effect  upon  labor  of  a  limitation  of  profits. 
We  are  able  to  see  it,  however,  among  the  managerial 
workers  at  the  Dennison  Plant,  and  among  the  shop 
workers  of  the  Wayne  Knitting  Mills  and  the  White 
Motor  Company. 

There  is  probably  no  place  in  the  United  States 
where  the  employees  have  shown  greater  zeal  for  effi- 
ciency and  for  output  than  at  the  Wayne  Knitting 
Mills,  where  we  found  the  closed  union  shop  of  the 
Full  Fashioned  Hosiery  Workers  working  steadily  on 
high,  straight  day  wages  (Chapter  XII).  These  men 
pointed  with  pride  to  the  record  of  their  company  hav- 
ing never  paid  annual  dividends  in  excess  of  12  per 
cent  on  its  stock,  all  of  it  unwatered.  They  pointed 
also  to  the  emergency  fund,  built  up  from  what  might 
have  been  turned  over  to  the  stockholders  in  the  form 
of  profits,  and  to  the  liberal  old  age  pensions  provided 

*  Samuel  Gompers.     The  American  Federationist,  June,   1920, 

pp.  523-524- 

*John  Francis  Neylan,  representing  The  Public.  "Capital,  La- 
bor and  the  Public.  Transactions  of  the  Commonwealth  Club 
of  California."    September,  1919,  p.  349. 


386  INDUSTRIAL  GOVERNMENT 

out  of  another  fund  that  might  also  have  gone  as 
profits.^ 

At  the  White  Motor  Company,  the  poHcy  of  volun- 
tary limitation  of  profits  is  likewise  pursued.  "Our 
policy  has  been  in  the  past,  and  is  now,  to  limit  payment 
of  dividends  to  8%  on  capital  stock,"  says  the  blue 
print  flier  which  contains  the  maxims  of  the  company. 

There  are  other  factors  than  this  at  work  at  the 
White  Motor  Company  but  this  limitation  no  doubt 
has  something  to  do  with  the  1 1 1  per  cent  increase  in 
per  capita  production  from  19 14  to  19 19  on  a  straight 
hourly  wage  basis. 

We  find,  then,  a  growing  recognition  among  man- 
agers of  labor's  resentment  against  the  constant  flow 
of  a  stream  of  profits  into  the  hands  of  absentee  stock- 
holders, and  a  belief  that  this  resentment  results  in 
restricted  production.  We  suspect  that  this  feeling  is 
really  a  reflection  of  management's  own  resentment  of 
this  state  of  affairs.  According  to  our  observation, 
labor's  resentment  is  directed  at  exorbitant  profits. 
It  makes  no  fine  distinctions  as  to  who  gets  them. 

"The  coal  miner  gets  25  cents  more  a  ton  for  dig- 
ging coal;  the  consumer  pays  $3.00  a  ton  more  than 
he  did  last  spring.  When  you  are  ordering  your  next 
winter's  coal  and  the  dealer  tells  you  the  price  is  $2.00 
to  $3.00  higher,  'because  of  the  increase  in  wages  to 
miners,'  smile  pleasantly  and  say  something  about 
coal  miners  driving  to  work  in  limousines."  ^ 

When  labor  has  no  way  of  knowing  whether  the  dis- 

*The  strike  discussed  in  Chapter  XII  has  little  significance 
for  the  point  made  here  concerning  efficiency.  It  resulted  from 
a  controversy  over  profit-sharing  and  reduction  of  wages. 

^The  Worker  (Ft.  Wayne,  Ind.).  April  23,1920.  Quoted 
from  the  Butcher  Workman's  Advocate. 


JOINT  CONTROL  387 

tribution  of  the  product  is  fair  or  not,  its  suspicions 
fall  alike  upon  the  just  and  the  unjust.  Distrust  of 
capital  where  the  facts  are  not  known  may  result  in 
a  bad  spirit  among  the  employees,  and  in  as  low  pro- 
duction as  if  the  distribution  were  actually  known  to 
be  unjust. 

Every  protest  of  capital  against  making  known  the 
facts  simply  confirms  the  suspicions  of  labor.  Such 
incidents  as  the  protest  of  the  coal  operators  against 
having  the  President's  Commission  entertain  as  evi- 
dence the  figures  which  the  miners'  organization  had 
collected  relative  to  the  organization,  capitalization, 
earnings,  and  profits  of  the  anthracite  companies,  and 
the  constant  fight  to  prevent  publicity  of  individual 
and  corporation  income  tax  returns  convince  labor  that 
they  are  being  wronged,  and  that  they  have  no  duty  to 
produce  more  until  this  injustice  is  righted. 

Many  employers  are  beginning  to  feel  that  con- 
cealment leads  to  exaggeration,  and  that  the  policy 
of  secrecy  is  a  mistake.  They  feel  that  if  what  em- 
ployers do  is  justifiable,  they  will  be  able  to  explain 
it  to  the  satisfaction  of  their  employees;  and  that  in 
the  interest  of  production,  it  is  their  duty  to  make  the 
attempt. 

"Employers,"  says  the  Cleveland  Chamber  of  Com- 
merce, "should  recognize  the  need  of  informing  their 
employees  on  the  subject  of  business  principles  as 
affecting  their  mutual  interests,  especially  the  relation 
of  wages  and  expense  to  costs  and  prices,  and  the  neces- 
sity for  an  equitable  return  on  invested  capital.  Frank- 
ness is  advised  on  the  part  of  employers  in  placing 
before  their  employees  business  details  necessary  to 
prove   these   economic    facts      Employees   should   be 


388  INDUSTRIAL  GOVERNMENT 

equally  frank  in  discussing  with  their  employer  matters 
afifecting  their  conditions  of  employment  and  the  in- 
terests of  their  industry.  Such  an  attitude  on  the  part 
of  both  employer  and  employee  will  tend  to  remove  the 
barrier  of  suspicion  and  distrust  which  often  is  the 
cause  of  labor  disputes,  and  establish  a  spirit  of  mutual 
interest  and  confidence."  ^ 

"A  good  many  things,"  says  Charles  Edison,^  must 
be  cleared  up  in  workers'  minds  (just  as  a  good  many 
things  must  be  cleared  up  in  employers'  minds)  before 
anything  like  ideal  conditions  can  be  developed  in 
American  industry.  Workers  do  not  always  realize  the 
exact  relationship  between  their  product  and  the  em- 
ployers' profits.  Take  a  man  who  gets  $20  for  a  cer- 
tain job  and  sees  his  output  sold  for  $100.  He  is 
likely  to  imagine  that  the  employer  makes  $80  profit 
on  the  work.  He  doesn't  realize  the  extent  of  over- 
head charges  against  his  product,  the  amount  of  raw 
material,  the  thousand  and  one  things  which  enter  into 
the  production  and  selling  end,  the  many  prices  which 
affect  costs  and  profits.  Often  he  has  no  conception  of 
the  fundamentals  of  competitive  business.  He  doesn't 
realize  that  very  likely  the  employer  who  seems  to  be 
making  a  fine  profit  is  walking  the  floor  nights  won- 
dering how  he  can  meet  his  obligations.  .  .  .  Capital, 
the  employer,  has  fallen  into  the  habit  of  secrecy,  and 
it  may  be  that  this  habit  has  grown  out  of  knowledge 
that  there  have  been  things  in  by-gone  days  about  the 
conduct  of  business  which  must  be  kept  under  cover 
for  safety's  sake.  ...  It  is  our  belief  that  business 
should  not  make  itself  mysterious." 

*  "Declaration  of  the  Cleveland  Chamber  of  Commerce"  {The 
Survey),  March  13,  1920. 

*  The  Saint  Paul  Pioneer  Press,  Sept.  7,  1919,  p.  5. 


JOINT  CONTROL  389 

We  have  seen  several  places  where  an  attempt  was 
being  made  to  clear  up  some  of  the  mysteries  of  busi- 
ness. The  White  Motor  Company,  for  example,  does 
not  stop  with  simply  announcing  that  its  profits  are 
limited  to  8  per  cent.  In  the  classes  described  in  Chap- 
ter I,  officials  of  the  company  instruct  their  employees 
in  the  costs  of  production  and  in  the  principles  of  dis- 
tribution. Their  employees  are  dependent,  it  is  true, 
upon  the  integrity  of  the  firm  for  the  truth  of  what 
they  are  told,  but  they  can  verify  the  statements  given 
them  by  comparison  with  the  annual  report  of  the 
Board  of  Directors  to  the  stockholders.  At  Filenes' 
(Chapter  V),  the  employees,  being  represented  on  the 
Board  of  Directors,  have  access  to  the  books  of  the 
company.  That  they  have  not,  however,  always  trusted 
their  own  ability  to  interpret  correctly  what  they  see 
is  evidenced  by  their  employment  at  one  time  of  an 
accountant  to  go  over  the  books  and  determine  whether 
they  were  receiving  the  profits  agreed  upon  between 
them  and  the  company. 

These  firms  are  both  open  shops.  Among  closed 
union  shops,  we  know  as  yet  of  no  actual  demand  on 
the  part  of  employees  to  see  the  books  of  the  com- 
pany. The  railroad  employees  and  the  mine  workers, 
however,  have  gone  ahead  and  calculated  costs  and 
profits,  without  access  to  the  books.  The  employers 
of  the  Photo-Engravers  are  under  agreement  with  their 
employees  to  keep  accurate  accounts,  but  the  latter  have 
not  demanded  to  see  the  accounts.  That  will  probably, 
however,  be  the  next  step. 

"We  have  reached  a  status  in  our  craft,"  says  Mat- 
thew Woll,  President  of  the  International  Photo- 
Engravers,  "where  our  interests  relate  not  alone  to 


390  INDUSTRIAL  GOVERNMENT 

wages  and  hours.  The  necessity  of  our  time  demands 
that  we  have  full  and  complete  knowledge  of  all  trade 
and  business  relations.  We  need  to  know  the  cost  of 
production — the  selling  price — the  overhead  charge — 
the  division  of  the  income  jointly  produced  by  our  em- 
ployers and  ourselves."  ^ 

The  shop  employees  of  the  White  Motor  Company 
have  a  good  deal  of  information  as  to  the  distribution 
of  the  product,  but  they  have  no  authority  over  it. 
Yet  the  two  bad  principles  which  are  absent  at  the 
White  Motor  Company,  namely,  unjust  profits,  and 
secrecy  concerning  distribution,  are  less  important  so 
far  as  production  is  concerned,  than  the  third  principle 
that  distribution  shall  be  by  agreement  between  the 
parties  to  production,  rather  than  by  the  simple  dictum 
of  one  factor,  capital,  or  one  small  group  of  labor, 
management. 

Just  how  much  wages  labor  should  receive  is  not  a 
matter  which  can  be  settled  by  an  appeal  to  reason  or 
to  justice  in  general.  Reason  and  ideas  of  justice  are 
individual,  not  general.  To  one  person  it  appears 
reasonable  that  the  laborer  should  receive  the  "full 
product  of  his  toil"  if  anybody  can  find  out  what  that 
is.  To  another  it  looks  as  if  labor  should  have  a 
"living  wage."  The  trouble  begins  when  any  group 
comes  together  to  try  to  determine  what  a  living  wage 
is.  To  one  person,  a  living  wage  for  a  family  in- 
cludes an  automobile,  to  another  it  includes  only  the 
bare  essentials  of  food,  clothing  and  shelter — that  is, 
the  smallest  sum  on  which  anyone  is  found  to  be  living 
at  present.    A  man  is  likely  to  have  one  idea  of  a  liv- 

*  American  Federation  of  Labor  Weekly  News  Letter,  June 
28,  1919. 


JOINT  CONTROL  391 

ing  wage  for  himself  and  a  different  idea  for  other 
people.  A  reasonable  rate  of  any  kind  must  be  a  com- 
promise. But  no  rate  can  be  considered  reasonable  or 
just  when  one  side  has  all  the  power,  or  sufficient  power 
to  coerce  the  other  into  accepting  its  idea  of  reason. 

There  are  two  considerations  involved  in  the  wage 
question.  One  is  the  amount  of  money  which  an  in- 
dividual receives  for  his  work,  the  other  the  amount 
of  work  he  gives  in  return  for  his  wages. 

We  have  found  among  certain  scientific  manage- 
ment employers  a  tendency  to  claim  that  while  the 
amount  of  wages  paid  is  a  matter  for  bargaining  and 
agreement,  the  amount  of  work  to  be  given  in  return 
for  the  wage  is  a  matter  for  scientific  measurement. 
Thus  while  they  might  agree  with  their  employees  to 
pay  a  minimum  wage  of  sixty  cents  an  hour  on  certain 
operations,  they  would  reserve  to  themselves  the  power 
to  determine  through  a  time  study  the  amount  of  work 
to  be  given.     ( Chapter  IV. ) 

The  control  by  the  employer  over  the  "scientific" 
expert  or  time  study  man  has  been  the  source  of  much 
friction  in  scientific  management  plants,  and  of  criti- 
cism by  organized  labor.  Its  undesirability  is  gradually 
being  recognized,  and  a  system  of  joint  control  by 
employers  and  employees  is  being  inaugurated  in  union 
and  "company  union"  plants.     (Chapters  IX,  XVI.) 

The  determination  of  wages  by  agreement  is  grad- 
ually coming  to  involve  the  classification  of  occupa- 
tions by  agreement.  There  was  a  time  when  the 
employer  who  dealt  with  trade  unions  had  to  make 
his  agreement  with  each  one  individually,  no  matter 
how  many  unions  were  represented  in  his  establish- 


392  INDUSTRIAL  GOVERNMENT 

ment.  Each  union  went  after  all  it  could  get,  regard- 
less of  the  others. 

Fortunately,  that  method  of  collective  bargaining  is 
giving  way  to  something  more  equable.  The  unions 
within  the  plant  are  in  some  cases  federating  and  work- 
ing out  their  scales  together.  Shipyard  workers,  rail- 
road employees  and  clothing  workers  have  adopted 
this  method. 

So  far  there  are  few  expressions  of  labor  on  the 
wages  of  management.  So  far  as  we  know,  the  great 
body  of  the  employees  have  no  control  over  the  wages 
of  management  except  in  those  firms  in  which  they 
exercise  it  through  their  representatives  on  the  Board 
of  Directors.  At  the  Milwaukee  Street  Railway  Com- 
pany (Chapter  XIII)  the  company  organization  in- 
cludes all  the  employees  from  the  President  down,  but 
the  salaries  of  the  managerial  force  are  not  brought 
up  for  discussion  when  the  wage  schedule  for  the  other 
employees  is  being  made  out.  At  the  White  Motor 
Company,  where  the  distribution  of  the  costs  is  dis- 
cussed with  employees,  the  salaries  of  individuals  in 
the  management  have  not  been  discussed.  There  is 
noticeable,  however,  some  general  uneasiness  and  sus- 
picion concerning  the  wages  of  management  as  well 
as  concerning  profits.  In  the  interest  of  production, 
this  suspicion  should  be  allayed  by  a  frank  discussion 
of  the  matter  with  all  employees.  If  the  salary  paid  is 
justifiable,  there  is  little  doubt  that  labor  would  con- 
sider it  a  legitimate  charge  on  the  business.  There 
should  be  the  same  publicity  and  mutual  understanding 
with  regard  to  the  wages  of  clerical  workers  and  scien- 
tific experts.  The  whole  body  of  employees,  in  other 
words,  should  understand  the  obligations  and  the  com- 


JOINT  CONTROL  393 

pensation  of  all,  and  should  thus  be  in  a  position  to 
exert  a  wholesome  influence  in  keeping  up  the  stand- 
ards of  performance  of  all. 

It  is  not  merely  wages  in  this  wider  sense,  that  is, 
wages  of  management,  of  scientific  experts,  clerical 
and  shop  workers,  but  the  rate  of  profits  also  which 
must  be  subject  to  agreement  between  both  the  parties 
in  industry,  taking  into  consideration  the  money  mar- 
ket, the  necessary  reserves,  the  condition  of  the  indus- 
try and  justice  to  employees  and  the  public. 

To  make  a  statement  of  this  kind  is  to  lay  one's 
self  open  to  immediate  attack  from  the  whole  profit- 
receiving  world.  But  the  profit-receiving  world  has 
reached  a  point  where  it  is  necessary  to  set  up  some 
effective  protection  for  the  industry,  for  its  own  em- 
ployees and  for  the  public. 

The  Dodge  vs.  Ford  decision,  mentioned  above,  sets 
up  a  theory  of  business  which  recognizes  no  equality 
of  power  or  of  interest  between  the  factors  of  pro- 
duction or  the  public.  It  goes  against  the  growing 
belief  that  labor  and  the  public  have  an  interest  in 
industry  equal  to  that  of  capital.  It  goes  against  the 
notion  that  profit,  wage  and  price  should  be  reasonable. 
It  is  opposed  to  the  new  philosophy  which  makes  the 
industry  or  production  itself,  not  the  factors  of  pro- 
duction, or  any  one  factor,  the  important  item,  and 
which  recognizes  the  right  of  the  public  to  demand 
that  equal  responsibility  be  exercised  by  all  the  parties 
in  production  to  produce  needed  articles  at  a  reason- 
able rate. 

An  antidote  to  the  theory  of  irresponsibility  ex- 
pressed by  this  decision  is  to  be  found  in  the  organiza- 
tion of  all  employees  and  the  assertion  by  them  of 


394  INDUSTRIAL  GOVERNMENT 

equal  power  with  capital  over  profits,  wages  and  prices. 
If  management  is  bound  by  the  principle  of  this  de- 
cision to  take  into  consideration  only  the  interests  of 
capital,  then  the  employees  must  protect  themselves 
and  the  public  by  refusing  to  work  except  on  conditions 
of  reasonable  wages,  reasonable  prices  and  reasonable 
profits.  The  directors  who  represent  capital  and  their 
servants,  management,  under  this  decision,  cannot  of 
their  own  initiative,  take  notice  of  the  interests  of 
labor  and  the  public  until  labor  by  demanding  consider- 
ation as  a  condition  of  continued  service,  or  the  public 
by  demanding  it  as  a  condition  for  the  permission  of 
continued  existence  of  the  industry,  threaten  the  profits 
of  the  stockholders  if  their  terms  are  not  considered. 

The  need  for  some  control  by  labor  or  the  public 
over  profits  is  clearly  demonstrated  by  recent  events 
in  the  industrial  world.  Throughout  the  war  and  the 
prosperous  post-war  period,  capital  justified  the  taking 
of  enormous  profits  by  the  "rainy  day"  argument. 
Profits  must  be  large  in  order  to  accumulate  a  fund  to 
tide  industry  over  the  coming  period  of  depression  and 
to  prevent  unemployment  and  suffering. 

But  when  the  depression  actually  came,  where  was 
the  "rainy  day"  fund  ?  When  they  found  that  demand 
was  low  and  the  supply  great,  many  employers  forgot 
their  duty  of  preventing  unemployment,  forgot  theii" 
"rainy  day"  fund  and  shut  down. 

The  trouble  with  the  "rainy  day"  funds  is  that  they 
are  voluntary  funds — elusive  funds  that  can  be  spirited 
away.  Capital,  which  manages  the  industry,  is  respon- 
sible to  no  one  for  maintaining  them  for  the  time  when 
needed.  Some  firms,  like  the  Wayne  Knitting  Mills 
(Chapter  XII)   do  conscientiously  maintain  and  use 


JOINT  CONTROL  395 

such  a  fund.  But  the  continuance  of  that  policy  de- 
pends solely  on  the  will  of  the  owners  of  capital.  At 
the  Dennison  Plant  (Chapter  VI),  employees  have 
never  secured  any  agreement  from  capital  to  continue 
it,  and  even  if  there  were  an  agreement,  there  is  no 
organization  of  employes  with  sufficient  power  to  en- 
force it  against  the  will  of  the  management.  So  far 
as  we  know,  no  powerful  union  in  the  country  has 
ever  secured  an  agreement  for  such  a  safeguard.  The 
Amalgamated  Garment  Workers  have  suggested  it  as 
a  matter  to  be  worked  out.  This  is  as  far  as  labor 
has  gone.  There  is  a  precedent  for  some  such  promise 
in  the  public  utility  acts  of  the  various  states.  These 
acts  safeguard  the  industry  and  protect  the  manage- 
ment of  public  utilities  from  the  rapacity  of  the  stock- 
holder by  requiring  that  a  sum  sufficient  for  deprecia- 
tion be  set  aside  before  any  dividends  are  paid. 

Labor  is  slowly  beginning  to  see  that  its  comfort 
and  happiness  depend  upon  many  more  things  than 
wages  and  hours.  The  preservation  and  healthy  ex- 
pansion of  their  own  industry  and  of  industry  as  a 
whole  are  matters  of  real  importance  to  all  workers. 
All  industries,  not  merely  a  few  selected  ones  like 
those  which  furnish  electricity  or  water,  are  public 
utilities.  The  worker  in  any  industry  and  the  consumer 
of  the  product  of  the  industry  have  an  interest  in  the 
industry  which  precludes  them  from  sitting  down  and 
leaving  the  insiders  to  loot  or  to  wreck  it,  or  even  to 
pocket  excessive  profits  at  the  risk  of  wrecking  it.  It 
is  their  industry  as  much  as  capital's,  and  in  self- 
protection  they  must  insist  on  the  maintenance  of  funds 
for  its  preservation  and  expansion. 


396  INDUSTRIAL  GOVERNMENT 


POWER 

But  labor  cannot  do  this  without  power.  As  long  as 
labor  is  engaged  in  a  struggle  for  the  right  of  organi- 
zation it  has  little  time  to  devote  to  the  stabilization 
of  industry.  It  cannot  become  a  peace-time  construc- 
tive organization  until  it  has  established  firmly  its 
right  to  existence.  When  the  American  employer  real- 
izes as  clearly  as  does  the  English  employer  that  labor 
organization  is  as  inevitable  as  capital  organization, 
then  organized  labor  can  become  a  conscious  factor  in 
the  improvement  of  industry.  Labor  must  have  ap- 
proximate equality  of  power  before  it  can  be  held 
rightly  to  any  responsibility. 

Equality  of  power  is  a  vague  term,  and  may  cover 
a  variety  of  meanings.  In  this  connection,  however, 
it  means  equal  ability  to  stop  production  and  to  stop 
the  oth^r  factors  from  contributing  to  production ;  and 
equal  ability  to  hold  out  against  the  others.  It  means 
also,  equality  of  opportunity  for  the  individual,  ac- 
cording to  his  native  or  acquired  capacity. 

When  capital  can  arbitrarily  take  a  job  away  from 
a  man  who  is  doing  satisfactory  work,  and  the  man 
has  no  power  to  take  the  business  away  from  capital, 
that  is,  to  prevent  capital  from  producing  and  taking 
profits,  there  is  no  equality  of  power.  When  capital 
can  shut  down  industry  without  consulting  labor,  there 
is  no  equality  of  power.  Capital  is  free,  so  far  as 
labor  is  concerned,  to  go  where  it  can  obtain  the  highest 
profits;  labor  is  ofttimes  prevented  by  capital  from 
changing  over  to  a  place  which  pays  a  higher  wage. 
When  capital  can,  by  a  gentleman's  agreement  not  to 


JOINT  CONTROL  397 

"steal"  the  labor  of  another  firm,  prevent  a  workman 
from  taking  a  better  job,  and  thus  create  an  industrial 
serfdom  for  labor,  while  labor  cannot  retaliate  by 
chaining  capital  to  a  service  which  pays  less  than  the 
competitive  interest,  then  there  is  no  equality  of  power. 

On  the  other  hand,  when  employees  are  so  strongly 
organized  that  they  can  prevent  capital  from  taking 
the  job  away  from  an  individual  arbitrarily,  and  that 
they  can  prevent  capital  from  getting  others  to  fill 
their  places  when  they  strike,  there  is  approximate 
equality  of  power.  When  labor  is  so  organized  that  it 
can,  by  means  of  the  strike,  prevent  capital  from  pro- 
ducing, we  can  say  there  is  an  approach  to  equality  of 
power. 

Capital  is  often  able,  by  means  of  the  profits  it  ob- 
tains from  the  product,  to  finance  itself  over  a  long 
period  of  waiting  through  a  strike  or  lockout  or  un- 
employment. Labor  can  only  attain  equality  of  waiting 
power  by  means  of  organized  saving  in  the  form  of 
union  dues  and  strike  contributions.  Capital  is  also 
able  to  use  superior  weapons  in  fighting.  It  has  its 
own  newspapers  or  the  money  to  attach  newspapers  to 
its  cause.  It  has  the  money  to  tempt  capable  men  from 
the  service  of  labor  to  that  of  capital.  It  usually  has 
control  of  the  government  and  consequently  the  advan- 
tage of  police  protection. 

Suppose  labor  obtained  this  equality  of  power. 
What  effect  would  that  have  on  production?  Is  equal- 
ity of  power  really  in  the  public  interest? 

The  best  way  to  determine  this  is  to  see  how  the 
unions  have  used  and  are  using  their  power;  whether 
or  not  they  are  using  it  in  the  public  interest,  especially 
in  the  interest  of  production.    We  have  to  remember, 


398  INDUSTRIAL  GOVERNMENT 

however,  that  real  equaUty  of  power  has  never  been 
generally  attained  in  the  United  States.  As  long  as 
any  considerable  groups  are  unorganized,  so  that  they 
can  be  used  as  a  threat  against  organized  labor,  the 
coercive  power  of  capital  over  labor  is  stronger  than 
that  of  labor  over  capital.  Universal  organization  is 
necessary  to  real  equality  of  power.  We  can  only, 
therefore,  show  examples  of  cases  in  which  labor  is 
approximating  this  equahty  of  power  with  capital. 

In  the  first  place  many  of  the  constitutions  of  trade 
union  organizations  contain  the  statement  of  a  desire 
for  more  efficient  workmanship  and  increased  produc- 
tion as  a  result  of  their  organization.  Labor  periodi- 
cals and  newspapers  are  full  of  similar  sentiments.  A 
few  examples  can  be  given : 

"The  objects  of  this  union  shall  be  the  fostering  and  en- 
couragement of  a  higher  degree  of  skill  and  efficiency." 
(Constitution  Federal  Labor  imion,  affiliated  with  the  A. 
F.  of  L.) 

"Both  employers  and  employees  are  getting  their  living 
out  of  the  shoe  factories.  The  more  efficiently  the  factories 
are  conducted,  the  better  living  all  of  them  can  get."  (Shoe 
Workers'  Journal.    Date  not  given.) 

"No  fair  employer  can  long  guarantee  the  sale  of  union 
labor's  product  if  that  labor  is  deficient  in  skill,  and  mem- 
bers of  a  contracting  union  who  contribute  to  such  defi- 
ciencies are  enemies  of  the  union,  of  fair  conditions  of 
employment,  and  traitors  to  the  cause  they  glibly  espouse." 
{International  Steam  Engineer.  "A  duty  we  owe."  Edi- 
torial, Nov.,  1919,  pp.  352-353.) 

"Where  organized  labor  is  employed,  where  conditions  and 
wages  are  satisfactory,  where  the  workingman  knows  he 
cannot  be  dismissed  unless  the  cause  for  such  dismissal  is 
furnished  by  himself,  he  then  comes  to  look  upon  the  fac- 
tory, shop  or  store  in  which  he  is  employed  from  the  same 


JOINT  CONTROL  399 

angle  as  does  the  owner  or  manager,  evincing  the  same  lively 
interest  in  its  success  as  does  the  latter.  The  result  is  that 
the  worker  concentrates  and  there  is  a  decided  improvement 
in  the  quality  of  the  output."  {Stove  Mounters  and  Range 
Workers'  Journal,  April,  1919,  p.  100.) 

The  labor  press  is  full  of  expressions  of  this  kind 
but  the  employer  seldom  sees  them  in  the  public  press. 
They  are  worth  studying.  The  employer  who  is  hav- 
ing difficulties  with  his  union  men  will  probably  smile 
cynically  when  he  reads  them.  But  he  must  remember 
that  the  employee  also  smiles  when  he  reads  the  em- 
ployer's benevolent  expressions  of  solicitation  for  the 
general  public.  It  is  wholesome  for  both  to  see  them- 
selves mirrored  each  in  the  literature  of  the  other. 

One  real  test  of  the  effect  of  organized  labor  on 
production  is  to  be  found  in  the  testimony  of  employers 
of  union  labor.  Those  who  were  interviewed  on  this 
subject  all  claimed  that  the  existence  of  the  union  had 
not  hindered,  and  some  of  them  believed  that  it  had 
actually  improved  production.  They  considered  this 
not  so  much  the  result  of  conscious  effort  on  the  part 
of  the  union  employees  to  increase  production,  as  an 
indirect  result  brought  about  as  follows.  First,  the 
struggle  of  organized  labor  to  force  wages  upward  has 
led  employers  to  put  in  more  and  better  machinery,  and 
to  reorganize  their  whole  administrative  system  on 
more  efficient  lines.  Second,  opposition  by  workmen 
to  the  introduction  of  new  machinery  has  been  over- 
come where  they  have  confidence  in  the  power  of  the 
union  to  prevent  the  new  machinery  or  the  administra- 
tive change  from  having  a  bad  effect  upon  any  worker. 
(Chapter  XVI.)    Third,  in  those  union  establishments 


400  INDUSTRIAL  GOVERNMENT 

in  which  a  court  is  in  continuous  session  for  the  hear- 
ing of  all  complaints,  as  at  Hart,  Schaffner  &  Marx, 
and  the  Rochester  clothing  industry  (Chapters  XVI 
and  XVII),  the  knowledge  of  all  that  the  grievances 
of  all  can  be  aired  tends  to  make  each  one  careful  to 
conduct  himself  properly.  Grievances  that  would 
smoulder  and  become  more  bitter  if  hidden  away,  tend 
to  become  less  important  in  the  face  of  a  continuous 
session  of  the  court,  and  the  morale  of  the  whole  es- 
tablishment is  greatly  improved.  Fourth,  the  knowl- 
edge of  the  worker  that  through  his  organization  he 
has  power  to  force  his  employer  to  give  him  whatever 
he  is  able  to  produce,  and  not  cut  piece-rates  unreason- 
ably, makes  him  anxious  to  produce  as  much  as  pos- 
sible. With  a  powerful  union,  the  worker  can  protect 
himself  against  his  employer.  His  only  danger  under 
the  piece-work  system  is  that  his  own  desire  and  need 
will  urge  him  on  too  fast,  to  the  detriment  of  his  long- 
time, future  production. 

The  union  has  protected  and  increased  production  in 
still  other  indirect  ways.  Organized  labor  has  carried 
on  a  relentless  fight  against  child  labor,  against  ex- 
hausting hours,  and  in  favor  of  better  education  for 
the  worker,  and  protection  against  dependency  due  to 
accident,  unemployment  and  sickness.  It  has  worked 
for  better  housing,  for  protection  of  the  health  of  the 
worker,  for  fairer  taxation  methods,  a  higher  stand- 
ard of  living.  All  of  these  things,  in  their  turn,  have 
helped  to  lengthen  working  life  and  to  make  labor 
more  productive. 

It  is  thus  true,  that  while  the  unions  have  been  ac- 
cused of  indifference  and  hostility  to  the  introduction 
of  devices   for  increasing  production,  they  have  all 


JOINT  CONTROL  401 

along  been  steadily  working  to  destroy  some  of  the 
great  causes  of  individual  inefficiency.  They  have 
everywhere  forced  improvements  upon  the  unprogres- 
sive  employer. 

Really,  when  we  come  to  look  at  it,  labor's  definition 
of  "production"  is  different  fro*m  the  capitalist's  defi- 
nition of  production.  The  capitalist  defines  production 
as  the  amount  of  output  per  day  or  hour.  Labor  de- 
fines production  as  the  steady  output  for  a  life  time  of 
production.  By  the  capitalist's  definition  efficient  pro- 
duction per  day  or  hour  is  not  inconsistent  with  idle- 
ness through  over-production,  and  not  inconsistent 
with  incapacity  at  forty.  By  the  laborer's  definition  of 
production,  efficient  production,  is  not  consistent  with 
cycles  of  over-production  and  under-production,  and 
not  consistent  with  premature  old  age.  By  the  capi- 
talist's definition,  production  must  be  speeded  up  while 
the  hunting  is  good.  By  the  laborer's  definition  it  must 
be  spread  out  so  that  the  hunting  may  always  be  good. 
The  difference  is  perfectly  natural,  considering  the  dif- 
ferences in  their  situations.  The  capitalist  can  set 
aside  his  surplus  as  reserve  funds  to  carry  him  over 
dull  times  or  seasons.  If  he  does  not  do  so  he  goes 
bankrupt  and  falls  to  the  level  of  a  wage-earner.  The 
laborer  cannot  set  aside  a  sufficient  surplus  for  unem- 
ployment and  old  age,  and  when  he  goes  bankrupt  he 
has  no  lower  level  to  ease  his  fall  except  poverty  and 
charity.  It  is  not  surprising  that  they  have  two  defini- 
tions of  production  and  do  not  understand  each  other 
when  they  talk  of  efficiency.  The  capitalist's  idea  of 
efficiency  is  big  profits  to  take  care  of  no-profits.  The 
laborer's  idea  of  efficiency  is  a  life-time  of  steady  wages 
for  all. 


402  INDUSTRIAL  GOVERNMENT 

Protection  of  the  public  health  through  demands  for 
sanitation  in  hotels,  in  barber  shops,  and  other  public 
places,  and  the  abolition  of  sweatshops  are  forms  of 
service  to  the  public.  Protection  of  the  public  against 
exorbitant  prices  is  a  new  development.  The  icemen's 
demand  in  Chicago  that  their  wages  be  raised  without 
increase  in  the  price,  and  the  British  coal  miners'  re- 
cent demand  for  lower  coal  prices  are  examples  of 
this.  Organized  workers  have  sometimes  exercised 
their  power  in  self-restraint.  In  the  men's  garment 
trade  there  has  been  a  conscious  effort,  on  the  part  of 
the  leaders  at  least,  to  have  regard  for  the  future  needs 
of  the  industry  and  to  restrain  their  members  from  de- 
manding and  taking  all  that  the  traffic  will  bear  at  any- 
one time,  regardless  of  possible  disaster  to  the  industry 
in  the  future.  The  Amalgamated  Garment  Workers, 
for  example,  secured  an  agreement  with  employers  to 
which  the  latter  agreed  not  to  pay  more  than  ten  per 
cent  above  the  union  wage  scale.  With  the  intoxica- 
tion of  high  prices  and  high  profits  upon  them  many 
employers  disregarded  the  agreement  and  bid  wildly 
against  each  other  for  labor.  The  union  went  to  the 
extent  of  sending  committees  of  the  union  to  bring 
back  their  own  members  who  were  accepting  higher 
wages,  and  thus  prevent  the  violation  of  the  agreement 
and  the  demoralization  of  the  workers. 

Organized  labor  has  not  only  helped  production  by 
securing  humanitarian  legislation,  but  it  has  also  been 
found  invaluable  in  administration.  What  if  during 
the  war  there  had  been  no  labor  unions  and  no  labor 
leaders?  What  if  there  had  been  no  workingman  who 
stood  out  before  the  country  as  one  who  was  in  touch 
with  the  workers,  one  who  had  their  confidence,  one 


JOINT  CONTROL  403 

who  could  speak  for  them  with  authority?  What  if 
there  had  been  no  Samuel  Gompers,  no  representative 
of  labor  upon  the  councils  of  the  nation,  upon  the  em- 
ployment boards,  upon  the  boards  which  fixed  the  prices 
of  food  products?  And  what  if  now  in  times  of  peace, 
there  were  no  great  labor  movement  to  work  for  edu- 
cation? What  if,  when  a  labor  bureau  or  industrial 
commission  needs  assistance  from  employers  and  em- 
ployees in  working  out  standards  of  safety  and  com- 
pensation it  had  to  take  as  a  representative  of  labor  a 
man  who  could  communicate  with  no  groups  of  em- 
ployees and  speak  for  none  of  them? 

Sometimes,  the  process  may  seem  slow  and  painful, 
but  after  all  it  is  through  labor  organization,  through 
negotiation,  through  representation,  through  delega- 
tion and  acceptance  of  responsibility  that  order  is 
evolving  in  industry.  For,  last  of  all,  the  union  is 
serving  a  great  public  purpose  for  which  it  is  seldom 
given  credit.  It  is  a  real  school  for  citizenship  in  a 
democracy.  This  is  especially  true,  where,  as  in  the 
clothing  trades,  there  is  in  existence  machinery  for 
the  constant  settlement  of  grievances.  Here  in  their 
own  industry  the  people  are  in  daily  contact  with  the 
workings  of  representative  government.  Here  they 
learn  to  look  for  justice  to  an  established  industrial 
government;  they  learn  to  join  with  the  employer  in 
paying  the  expenses  of  their  machinery  of  justice; 
they  learn  self-restraint.  They  learn  also  to  be  up- 
standing and  fearless  when  they  are  right,  knowing 
that  they  have  all  the  means  of  publicity  at  their  com- 
mand. They  learn  to  formulate  their  desires  and  their 
discontent  into  constructive  proposals  which  will  be 
able  to  stand  up  under  the  criticism  of  fellow  workers 


404  INDUSTRIAL  GOVERNMENT 

and  the  hostility  of  employers.  They  learn  to  present 
their  demands  in  an  orderly  and  dignified  manner,  and 
to  practice  self-restraint  and  group-restraint  for  the 
good  of  the  whole  body  of  workers. 

This  contribution  of  the  union  to  training  for  citi- 
zenship is  also  a  contribution  to  the  cause  of  production. 
It  tends  to  reduce  and  has  reduced  in  the  clothing  and 
printing  industries,  strikes  and  stoppages  and  the  losses 
consequent  upon  them.  It  is  solving  the  problem  of 
discipline  which  is  another  important  factor  in  produc- 
tion. It  adds  greatly  to  the  interest  in  the  day's  work. 
It  supplies  the  best  kind  of  an  antidote  to  the  dangerous 
monotony  resulting  from  extreme  division  of  labor  and 
of  processes.  It  makes  the  worker  feel  himself  a  self- 
respecting  human  being  instead  of  a  beast  of  burden. 

Attempts  to  introduce  orderly  government  in  an  in- 
dustry cannot  be  expected  always  to  succeed  immedi- 
ately. The  system  which  has  worked  smoothly  for 
years  at  Hart,  Schaffner  and  Marx  has  broken  down 
time  and  again  in  New  York  City.  The  thousands 
of  petty  firms  in  New  York  with  their  corresponding 
thousands  of  degrees  of  efficiency  do  not  unite  easily 
for  negotiation  and  cooperation  with  their  employees. 
It  need  occasion  no  more  surprise  if,  in  the  process  of 
setting  up  industrial  government,  as  many  failures  and 
periods  of  reaction  will  be  recorded  as  in  the  process 
of  setting  up  political  government.  Out  of  the  very 
failures  of  political  governments  have  grown  the  im- 
provements of  succeeding  governments.  Political  gov- 
ernment has  had  a  long  history.  Industrial  govern- 
ment has  had  a  short  history.  The  final  form  of  neither 
will  ever  be  reached.  Each  is  a  changing,  developing 
process. 


JOINT  CONTROL  405 

A  phenomenon  which  brings  much  criticism  upon 
labor  is  the  increase  in  per  capita  production  during 
periods  when  there  is  much  unemployment.  The  bur- 
den of  criticism  is  that  if  labor  can  produce  more  at 
such  times  it  can  surely  do  it  all  the  time. 

The  answer  to  this  is  twofold:  First,  in  periods  of 
unemployment,  holding  the  job  becomes  almost  a  mat- 
ter of  life  and  death  for  the  workman  and  his  family. 
It  becomes  at  least  a  matter  of  bread  and  butter,  and 
medical  care.  The  employee  therefore  speeds  up  in 
competition  with  his  fellow  employees,  sometimes  at 
a  rate  which  he  could  not  keep  up  indefinitely  without 
injuring  his  health.  Secondly,  if  laborers  could  keep 
up  this  pace  all  the  time,  we  ought  to  be  able  to  work 
out  some  form  of  industrial  government  which  will 
encourage  them  to  do  so.  As  long  as  human  wants 
keep  ahead  of  human  needs,  which  are  all  the  time  in- 
creasing, there  can  be  no  such  thing  as  general  over- 
production. Mistakes  in  production  there  may  be,  due 
to  lack  of  statistics  or  faulty  estimation  of  expected 
consumption  of  particular  articles,  and  to  lack  of  co- 
operation between  the  various  firms  in  the  same 
industry.  But  as  long  as  the  workers  throughout  the 
world  continually  seek  to  raise  their  standard  of  living 
there  is  an  incentive  to  greater  and  greater  production. 

Why,  then,  do  they  not  have  regard  to  this  incentive 
all  the  time? 

Simply  because  there  is  now  no  guarantee  that 
greater  production  will  mean  a  higher  standard  of 
living  for  the  worker.  There  is  no  guarantee  that  all 
wages  will  rise  in  proportion  to  production  and  will 
consequently  be  able  to  buy  back  the  increased  product. 
Labor  will  speed  up,  either  unconsciously  or  unwill- 


4o6  INDUSTRIAL  GOVERNMENT 

ingly,  when  it  faces  loss  of  a  job  as  an  alternative.  It 
will  only  speed  up  consciously  and  willingly  when  it  is 
organized  so  that  it  faces  sure  reward  in  proportion 
to  its  efforts. 

Can  a  company  union  do  just  as  well  as  a  national 
union?  This  is  the  question  which  many  employers 
answer  affirmatively. 

Organized  labor  does  not  see  how  it  is  possible.  The 
company  union  might  strike,  but  it  has  no  way  of 
reaching  other  workers  to  prevent  them  from  breaking 
the  strike.  It  cannot  provide  itself  with  strike  benefits 
and  so  assure  its  waiting  power.  It  cannot  protect 
its  own  employers  by  exerting  pressure  on  their  com- 
petitors to  come  up  to  the  standards  demanded.  It 
cannot  exert  influence  in  favor  of  legislation  for  better 
conditions  for  all  employees.  It  cannot,  except  in  the 
case  of  great  corporations  with  plants  throughout  the 
country  and  by  means  of  a  consolidation  of  the  unions 
of  these  plants,  develop  great  leaders  in  whose  power 
and  sagacity  employees  have  confidence. 

Industrial  problems  are  no  longer  local  problems. 
The  labor  policy  of  one  great  firm  may  affect  labor 
conditions  and  sentiment  throughout  the  country. 
Credit  has  become  a  national  problem,  and  the  credit 
policy  of  the  nation  is  of  as  much  importance  to  labor 
and  to  the  consumer  as  to  the  employer.  The  distribu- 
tion of  credit  must  be  in  the  interest  of  the  public,  and 
the  machinery  must  be  invented  by  which  that  interest 
can  be  ascertained  and  secured.  That  machinery  must 
be  such  that  not  merely  one  factor  in  production,  capi- 
tal, but  all  are  able  to  offer  information  and  sugges- 
tions. One  of  the  greatest  obligations  of  organized 
labor  in  the  future  is  the  securing  of  representation 


JOINT  CONTROL  407 

upon  the  bodies  which  determine  who  shall  have  credit, 
and  the  protection  of  the  credit  of  firms  which  give  a 
square  deal  to  labor  and  to  the  public. 

We  are  beyond  the  feudal  stage,  economically  and 
politically.  A  little  group  organized  within  an  indus- 
try but  separated  from  its  fellow  workers  by  the  wall 
of  a  company  union,  and  without  machinery  for  regu- 
lar communication  with  them  is  an  anachronism  in 
present-day  society  as  much  as  would  be  an  isolated 
manor  of  feudal  times  or  a  former  slave  plantation 
surviving  as  the  unit  of  farming,  manufacture  and  ex- 
change. 

It  is  not  merely  an  anachronism.  It  is  practically 
impossible  to  carry  out  consistently.  For  in  those  in- 
dustries in  which  there  is  a  shop  organization  we  find 
employers  and  employees  constantly  consulting  condi- 
tions in  other  industries  or  in  other  firms  in  the  same 
industry  as  an  aid  to  the  solution  of  their  own  prob- 
lems. At  the  Nunn,  Bush  &  Weldon  Shoe  Factory,  the 
employees'  organization  sent  a  committee  to  study  the 
rates  paid  on  certain  operations  in  another  shoe  factory 
(Chapter  XI).  At  the  White  Motor  Company  we 
were  told  that  they  were  paying  rates  above  the  union 
scale  (Chapter  I)  ;  that  is,  they  were  actually  accepting 
as  their  minimum  the  rates  fixed  by  agreements  of  or- 
ganized employers  and  employees  of  other  firms. 

It  is  conceivable  that  the  plant  organizations  in  the 
steel  industry  may,  for  the  sake  of  equalizing  condi- 
tions in  the  different  plants,  federate  into  one  industrial 
organization.  If  other  employees  throughout  the  coun- 
try were  not  also  organized,  this  amalgamation  might 
constitute  a  menace.  There  would  be  a  real  danger  to 
an  otherwise  unorganized  public  if  the  employees  and 


4o8  INDUSTRIAL  GOVERNMENT 

the  corresponding  group  of  employers  were  thus  or- 
ganized in  some  industry  producing  necessities  and 
having  a  monopoly  upon  the  product.  The  two  groups 
could  then  form  a  conspiracy  to  raise  the  price  and 
divide  the  spoil.  In  fact,  we  have  had  in  the  past 
many  examples  of  collusion  between  capital  and  labor 
to  do  that  very  thing  when  a  group  of  skilled  laborers, 
completely  organized  in  an  industry,  have  ruthlessly 
pushed  up  their  own  wages  out  of  proportion  to  other 
workers,  in  the  same  or  other  industries,  and  have  al- 
lowed the  cost  to  be  passed  on  to  the  consumer. 

The  remedy  for  this  dangerous  situation  is  not  less 
organization,  but  more  organization.  Such  a  con- 
spiracy can  be  effective  only  when  the  other  industrial 
groups,  either  of  employers  or  laborers,  are  not  organ- 
ized for  retaliation  and  creating  and  enforcing  a  public 
opinion  which  will  condemn  and  ostracize  them  as 
profiteers.  We  see  how  this  principle  has  worked  in 
the  case  of  the  railroad  employees.  The  four  brother- 
hoods in  the  early  days  of  their  organization,  were  able 
to  raise  their  wages  far  above  the  level  of  the  average 
workers.  The  public  paid  the  bill.  The  trackmen  and 
other  railroad  employees,  unorganized,  were  at  the 
general  wage  level  of  the  country,  or  a  little  below. 
But  when  the  war  aided  the  organization  of  these 
poorly  paid  groups,  and  their  representatives  began  to 
deal  with  the  representatives  of  the  brotherhoods,  the 
latter  pushed  the  claim  of  the  others,  and  moderated 
their  own  claims.  In  the  days  when  the  trackmen  were 
unorganized,  when  they  were  not  working  with  the 
brotherhoods  for  their  common  good,  when  they  had 
no  means  even  of  becoming  well  acquainted  with  them, 
the  brotherhoods  had  little  sympathy  for  them.    When 


JOINT  CONTROL  409 

they  came  into  association  with  the  brotherhoods  the 
latter  could  see  the  righteousness  of  their  claims  and 
their  greater  need. 

Employers  testify  that  when  their  employees  are 
called  on  to  make  a  distribution  of  a  bonus,  they  divide 
usually  on  the  basis  of  need — the  larger  amount  to  the 
lowest  paid.  This  principle  is  at  work  among  trade 
unionists.  As  workers  organize  and  are  able  to  com- 
municate with  each  other,  they  come  to  have  more 
understanding  of  the  point  of  view  and  needs  of  the 
others.  When  all  labor  is  so  organized  that  every  man 
and  woman  who  works  with  hand  or  brain  has  an 
opportunity  to  have  his  case  heard  by  his  fellow  work- 
ers, we  may  expect  less  grabbing  on  the  part  of  indi- 
viduals and  groups  and  a  greater  regard  for  the  rights 
of  the  public — that  is,  of  all  the  other  workers. 

The  organized  worker,  when  he  secures  power,  also 
must  accept  responsibility.  As  his  power  increases,  he 
comes  more  and  more  into  the  light  of  publicity  and 
criticism.  He  must  be  more  careful  about  his  actions 
or  he  has  the  "general  public"  upon  him.  If  the  "gen- 
eral public"  is  also  organized,  that  is,  if  it  becomes 
the  whole  group  of  organized  employers,  organized 
employees  and  organized  farmers,  it  will  not  allow  him 
to  take  more  than  his  fair  share  of  goods. 

Capital  organization  is  inevitable.  No  firm  can  live 
unto  itself  without  regard  to  the  policies  and  activities 
of  other  firms.  Each  must  be  influenced  to  some  extent 
by  conditions  in  the  other.  Labor  organization,  too,  is 
inevitable.  And  no  one  group  of  employees  can  or 
should  for  any  length  of  time  improve  the  condition 
of  its  members  at  the  expense  of  the  public;  that  is,  of 
employees  in  other  occupations. 


410  INDUSTRIAL  GOVERNMENT 

Fortunately,  organization  is  not  merely  inevitable; 
it  is  really  desirable  for  the  sake  of  securing  the  great- 
est possible  increase  of  production  and  consequently 
the  highest  standard  of  living  for  all.  It  is  necessary 
for  capital  to  organize,  as  it  is  doing,  on  a  national 
and  international  scale.  It  is  necessary  also  for  labor 
to  organize  on  a  parallel  scale.  For  this  purpose  labor 
organization  must  mean  the  shop  unit,  but  it  must 
also  mean  the  union  of  shop  units  in  great  national 
organizations ;  and  even  federations  with  foreign 
unions.  It  must  also  mean  organizations  parallel  with 
the  political  units — municipal,  state,  national  and  inter- 
national federations  or  councils  of  all  trades  and  occu- 
pations. There  must  be  machinery  for  influencing 
legislation  in  city,  state  and  nation.  There  must  also 
be  machinery  for  aiding  administration  in  city,  state 
and  nation. 

Since  organization  is  in  the  interest  of  production, 
under  modern  conditions,  it  ought  to  be  encouraged, 
rather  than  discouraged.  It  ought  to  be  made  easy 
rather  than  difficult.  If  it  were  possible  to  give  "the 
public"  an  understanding  of  the  public  purpose  of  the 
union  it  would  be  made  easy.  Since  this  is  impossible 
it  would  be  well  if  those  who  do  see  the  point 
would  go  out  with  organized  labor  in  a  campaign  to 
bring  the  others  in,  and  perhaps  to  secure  the  passage 
of  legislation  protecting  employees  in  their  right  to 
organize.  Similar  laws  in  the  past  have  been  declared 
unconstitutional,^  but  new  facts  have  come  to  light 
since  those  decisions,  or  were  not  brought  to  the  atten- 
tion of  the  court,  which  put  the  whole  matter  on  a 

*  Adair  v.  U.  S.,  208  U.  S.  161  (1908);  Coppage  v.  Kansas, 
236  U.  S.   I    (1915)- 


JOINT  CONTROL  411 

different  basis.  The  courts  were  unable  then  to  dis- 
cover the  public  purpose  of  the  union.  The  attorneys 
for  the  union  seem  themselves  not  to  have  seen  it. 
They  took  no  notice  of  the  lengthened  working  life 
due  to  its  own  activities  and  the  protective  legislation 
which  organized  labor  has  helped  to  secure.  They  took 
no  notice  of  the  need  for  a  check  upon  the  power  of 
absentee  owners  of  joint  stock  companies  over  produc- 
tion. They  knew  nothing  then  of  the  coming  war 
emergency  in  which  the  union  proved  to  be  of  immeas- 
urable service  in  aiding  the  nation  to  utilize  labor  to 
the  fullest  extent.  They  were  apparently  unaware  of 
the  increasing  complexities  of  administration  and  the 
necessity  for  crystallization  and  expression  of  labor's 
peculiar  knowledge  and  sentiment.  In  the  light  of 
these  facts  the  courts  would  today,  we  believe,  be  in- 
clined to  reverse  the  Coppage  and  Adair  decisions, 
against  which,  even  then,  vigorous  minority  opinions 
were  offered.  New  legislation,  however,  should  be 
more  carefully  worked  out  than  the  earlier  legislation. 
There  should  be  added  machinery  for  enforcement, 
probably  a  local  board  representative  of  employers  and 
employees  where  each  case  could  receive  immediate 
consideration.  There  should  have  been  a  better  rec- 
ognition of  the  reciprocal  rights  and  duties  of  corpora- 
tions and  unions  than  was  recognized  in  the  laws  de- 
clared unconstitutional. 

With  labor  organized,  and  capital  organized,  with 
each  group  and  individual  comparatively  safe  from 
arbitrary  action  on  the  part  of  other  groups  and  in- 
dividuals, and  with  the  knowledge  that  the  principles 
of  distribution  are  in  their  own  hands,  jointly  with 
capital,  there  is  nothing  to  distract  the  attention  of 


412  INDUSTRIAL  GOVERNMENT 

labor  from  the  possibilities  of  increased  wages  and 
comfort  through  increased  production.  There  is 
nothing  to  keep  them  from  taking  an  interest  in  the 
efficiency  with  which  the  business  is  conducted.  In 
fact,  there  is  everything  to  induce  them  to  take  such 
interest.  There  is  everything  to  make  them  desire 
careful  cost  accounting  systems,  such  as  those  which 
the  photo  engravers  are  now  considering  (Chapter 
XV),  and  careful  studies  of  possibilities  of  improve- 
ments in  production,  such  as  the  International  Ladies' 
Garment  Workers'  Union  of  Cleveland  are  having 
made  in  cooperation  with  the  employers.* 

When  they  have  secured  what  they  consider  a  fair 
division  of  the  existing  product,  then  they  must  turn 
to  increasing  production  as  their  only  means  of  rais- 
ing their  wages. 

Even  if  we  had  not  been  able  to  show  that  labor 
has  a  great  contribution  to  make  to  the  process  of 
management  and  that  it  should  assume  some  control 
over  distribution,  there  would  still  be  no  good  reason 
for  believing  that  labor  could  not  assist  production  in 
this  way.  For  labor  has  not  been  educated  with  these 
objects  in  mind. 

EDUCATION 

The  assumption  of  current  theories  of  educators 
has  been  that  the  rank  and  file  do  not  take  part  in  man- 
agement. Education  in  a  knowledge  of  the  problems 
of  industrial  management  and  finance  has  therefore 

'"Report  of  Miller,  Franklin  &  Basset,"  in  the  matter  of  the 
Cleveland  Cloak,  Suit,  Skirt  and  Dress  Industry.  Published  by 
the  International  Ladies'  Garment  Workers'  Union  and.  the 
Cleveland  Garment  Manufacturers'  Association. 


JOINT  CONTROL  413 

been  entirely  neglected  except  in  colleges,  where  the 
future  shop  employee  is  seldom  found.  The  high 
school  does  not  give  it.  The  trade  school  does  not 
give  it.  The  trade  school  assumes  that  the  boy  who 
learns  a  trade  is  so  fortunate  that  there  is  no  use  in 
preparing  him  for  the  higher  managerial  and  technical 
positions.  These  higher  positions  often  go,  conse- 
quently, to  the  young  inexperienced  college  graduate. 
The  bright  young  fellow  in  the  shops  is  passed  over, 
not  because  he  is  lacking  in  intelligence,  but  because 
his  parents  could  not  afford  to  finance  him  through 
high  school  and  college,  and  he  himself  was  not  suf- 
ficiently impressed  with  their  value  to  make  the  sac- 
rifices necessary  to  put  himself  through. 

The  remedy  for  this  situation  is  pointed  out  by 
Henry  Ford  and  by  the  Goodyear  Tire  and  Rubber 
Company.  Each  of  these  firms  has  established  a  part 
time  college  for  the  promising  men  among  their  shop 
workers  where  the  latter  can  be  prepared  for  the  en- 
gineering, the  scientific  and  the  managerial  work  of 
the  plant. 

Not  all  employers  can  do  this.  Neither  should  they. 
This  is  the  job  of  the  public  schools,  and  they  have 
failed  to  work  out  a  flexible  school  system  to  meet 
the  higher  industrial  needs  of  training  the  boy  who 
must  help  himself  through  school.  They  have  failed 
even  to  give  adequate  training  for  the  trades  or  those 
mechanical  processes  which  can  scarcely  be  dignified 
by  the  name  of  trade.  They  have  failed  utterly  to 
comprehend  the  lines  of  promotion  in  industrial  life 
and  to  prepare  each  child  to  go  up  the  line.  If  they 
have  failed  to  grasp  the  idea  that  education  must  mean, 
first,  training  to  earn  a  living  and,  second,  preparation 


414  INDUSTRIAL  GOVERNMENT 

for  promotion,  it  is  not  to  be  wondered  at  that  they 
have  failed  to  comprehend  the  possibilities  of  participa- 
tion by  all  workers  in  the  management  and  financial 
policies  of  the  industry  for  which  they  work. 

It  is  not  to  be  wondered  at  that  they  have  failed  to 
give  us  a  population  of  bright  young  workers,  well 
informed  on  all  phases  of  industrial  organization, 
finance  and  management.  We  have  allowed  our  youth 
to  waste  their  time  in  schools  on  inanities  and  non- 
essentials, and  then  we  insist  that  they  have  no  in- 
terest in  the  management  side  of  industry.  Naturally ! 
They  are  totally  in  the  dark  about  the  workings  of 
industry  and  finance.  They  have  studied  with  little 
interest  a  detached  geography,  detached  arithmetic,  al- 
gebra and  geometry,  a  detached  economics,  and  while 
they  have  been  tiring  themselves  out  with  this  abstract 
stuff,  they  have  been  neglecting  its  application  to  the 
industries  with  which  they  are  familiar.  They  have 
not  studied  the  financing  of  an  industry  at  the  out- 
set, the  needs  of  expansion,  the  processes  and  costs  of 
production,  the  processes  and  costs  of  marketing,  the 
labor  policy,  the  methods  of  improving  efficiency. 
Here  and  there,  as  in  the  University  of  Cincinnati,  we 
find  signs  of  an  understanding  of  the  relation  of  the 
public  school  to  industry  and  of  the  real  possibilities 
of  public  part-time  education  with  a  practical  in- 
dustrial atmosphere.  In  the  public  continuation 
schools  of  numerous  states  the  opportunity  exists,  but 
the  possibilities  are  not  developed. 

But  since  our  schools  have  thus  failed,  we  have  no 
ground  for  assuming  that  the  employee  naturally  has 
no  interest  in  such  things — that  he  is  interested  only 


JOINT  CONTROL  415 

in  his  pay  envelope.  We  might  just  as  well  say  that 
the  child  aged  two  has  no  interest  in  reading. 

The  foregoing  is  intended  to  show  that  for  the  sake 
of  production,  employees  must  have  a  share  in  man- 
agement, and  that  education  must  therefore  include 
education  for  participation  in  management;  that  edu- 
cation in  order  to  be  democratic,  must  give  all  who 
want  it  preparation  for  promotion  to  managerial  or 
technical  positions.  Now  we  come  to  a  third  demand 
upon  education,  namely  education  for  industrial  citi- 
zenship. 

If  labor  organization  serves  a  public  purpose,  then 
it  must  be  made  easy  and  efifective  by  means  of  care- 
ful preparation  of  the  child  for  its  future  citizenship 
in  the  industrial  as  well  as  in  the  political  world. 
Hence  every  child  should  study  the  organization  of 
industry  as  carefully  as  we  are  beginning  to  think  he 
should  study  the  organization  of  the  political  unit. 
He  should  become  acquainted  with  the  types  of  in- 
dustrial organization.  He  should  examine  the  vari- 
ous stages  of  industrial  government,  from  monarchy 
to  democracy.  He  should  study  methods  of  manage- 
ment, including  "scientific  management."  He  should 
study  the  various  types  of  labor  organization,  their 
accomplishments  and  their  failures.  He  should  study 
critically  their  constitutions,  methods  of  organization 
and  methods  of  negotiation.  Whether  he  is  in  the 
future  to  act  in  the  capacity  of  owner,  manager,  or 
shop  employee,  he  needs  to  be  taught  Low  to  put  his 
side  of  the  case  in  an  orderly,  self -controlled  manner. 
Whether  he  is  to  belong  to  the  rank  and  file  of  labor 
or  to  be  a  leader,  he  needs  to  learn  to  have  respect  and 
regard  for  the  reputation  of  his  organization,  of  his 


4i6  INDUSTRIAL  GOVERNMENT 

fellow  workers  and  for  public  opinion.  He  needs  to 
learn  to  make  use  of  his  facts  before  he  acts.  He 
needs,  in  short,  to  add  to  the  physical  force  of  organ- 
ization all  the  other  powerful  adjuncts  of  moderation, 
caution,  self-control,  dignity  and  intelligent  conviction. 
This  is  the  kind  of  training  which  we  need  on  both 
sides  of  the  table  at  which  capital  and  labor  meet. 
This  is  the  kind  of  education  which  we  can  demand 
from  our  schools  when  society  recognizes  that  demo- 
cratic government  of  industry  is  better  for  production 
than  autocracy,  however  benevolent  the  autocrat. 

"But  is  it?"  says  someone  who  is  still  unconvinced 
that  the  positive  evidence  for  industrial  democracy  out- 
weighs the  positive  evidence  for  industrial  autocracy. 
"You  have  given  some  cases  to  show  that  employees 
do  work  well  under  management  that  is  growing  more 
democratic.  But  how  do  you  account  for  the  fact 
that  in  some  shops  where  there  is  absolute  monarchy 
or  autocracy  they  are  actually  getting  out  more  prod- 
uct than  in  some  of  your  'democratic'  places?  You 
cannot  dodge  Henry  Ford." 

That  is  quite  true.  We  cannot  dodge  Henry  Ford. 
He  gets  production.  He  gets  it  on  a  straight  day 
wage.  He  gets  it  without  strikes.  He  divides  the 
work  up  into  simple  processes  which  violate  all  our 
theories  about  the  bad  effect  of  monotony.  He  em- 
ploys men  as  they  come,  even  to  the  lame  and  the 
blind.  When  the  wheels  and  the  belts  of  his  great 
factory  start,  they  push  the  work  on  steadily  and  in- 
exorably from  one  worker  to  another.  Each  worker 
takes  it  as  it  comes  and  must  finish  his  process  while 
it  is  on  its  way  to  the  next  process. 

Henry  Ford  gets  production.     He  makes  an  honest 


JOINT  CONTROL  417 

product.  He  aims  to  cut  the  price  to  the  consumer 
as  much  as  he  can.  Still  he  makes  millions.  He  uses 
those  millions  for  expansion,  for  scientific  research 
and  experiment.  He  pays  wages  to  his  men  which  he 
believes  will  enable  them  to  live  decently  and  he  insists 
that  they  shall  live  decently.  The  men  may  hate  the 
process  they  perform,  but  they  respect  Henry  Ford. 
So  does  the  public. 

Will  it  last? 

Marcus  Aurelius  died.  He  was  a  good  emperor 
while  he  lived.  But  his  mantle  of  statesmanship  did 
not  fall  upon  his  heir.  Neither  did  it  fall  upon  his 
people.  There  was  in  them  no  wisdom,  no  discipline, 
no  tradition  of  self-control  that  enabled  them  to  stand 
up  against  the  attacks  from  outside,  the  weakness  and 
mismanagement  within. 

An  empire  held  together  by  the  force  of  one  great 
will,  one  magnetic  personality,  one  man  or  a  few  men 
glorying  in  the  use  of  their  power  and  genius  for  the 
benefit  of  their  fellowmen,  compelling  submission  by 
force  of  respect  for  the  man  who  conceives  such  a 
great  enterprise,  such  an  empire  is  a  wonderful  thing 
— while  it  lasts.  But  suppose  that  the  genius  which 
built  up  this  empire  dies  with  the  emperor.  Suppose 
his  successors  lack  it.  Suppose  that  the  people  in  the 
empire  learn  to  rely  on  the  emperor  and  forget  to  use 
their  own  wisdom  and  power  to  perpetuate  the  gigan- 
tic institution  which  genius  has  set  up. 

It  is  the  old  question,  whether  it  is  better  to  have 
benevolent  autocracy  and  submission  resulting  tem- 
porarily in  tremendous  production,  or  growing  de- 
mocracy and  self-control  accompanied  by  steady  and 
interested  production. 


4i8  INDUSTRIAL  GOVERNMENT 

The  employer  dreams  of  a  world  in  which  he  will 
not  forever  be  engaged  in  the  struggle  to  discipline 
labor,  a  world  in  which  all  his  energies  will  be  freed 
for  the  mechanical  problem  of  production.  But  while 
he  is  dreaming,  labor  is  also  dreaming.  And  the  in- 
dustrial world  of  which  labor  dreams  is  also  a  world 
of  peace  and  production,  and  of  a  comfortable  stand- 
ard of  living  for  all.  It  is  a  world  in  which  all  capital 
and  all  labor  are  organized  for  the  purpose  of  carry- 
ing on  industry  efficiently  and  distributing  the  product 
justly;  a  world  in  which  the  desirability  of  labor  par- 
ticipation in  legislation,  and  of  labor  contribution  to 
industrial  management  is  fully  recognized;  a  world 
in  which  all  the  elements  in  industry  are  trained  to 
negotiate  in  an  orderly  and  civil  manner;  a  world  in 
which  adequate  machinery  exists  for  constant  consul- 
tation and  negotiation  upon  all  problems  of  produc- 
tion and  distribution;  a  world  in  which  labor,  secure 
in  its  power  to  obtain  for  itself  its  full  share  of  the 
product,  freed  from  the  necessity  of  spending  its  energy 
upon  the  fight  for  existence,  is  able  to  devote  its  time 
and  attention  to  the  production  of  wealth;  a  world 
which  recognizes  the  right  of  society  and  of  the  indi- 
vidual to  the  greatest  possible  material  comfort;  a 
world  in  which  each  human  being  is  afforded  the  sat- 
isfaction of  using  and  developing  his  powers  of  imag- 
ination and  planning  for  the  future,  as  well  as  his 
powers  of  accomplishment  upon  the  industry  by  which 
he  earns  his  living. 


INDEX 


Absentee  ownership,  60,  62; 
evils,  ;^2,  267,  295 ;  reme- 
dies,   296. 

Absenteeism,  150,  270,  334. 

Accidents.  See  Workmen's 
compensation. 

Adair  v.  U.  S.,  410. 

Adjustments.  See  Arbitra- 
tion. 

American  Federation  of 
Labor,  55,  82,  122,  132, 
186,  259,  370;  company 
unions,    115,    119,   122. 

American  Shipbuilding  Co., 
labor   agreement,   353. 

Americanization,    11,   19,  80, 

83. 

Anarchism,  268. 

Appeals.  See  Shop  commit- 
tees. 

Apprenticeship,  168,  172,  177, 
192,  208,  219,  245. 

Arbitration,  55,  iii,  118,  131, 
157,  165,  178,  183,  197,  200, 
207-210,  213-220,  231,  258; 
Australasian,  225 ;  effi- 
ciency, 53 ;  Filene's,  49 ; 
justice,  48;  legislative,  225; 
Rochester,  240. 

Belgium,  191. 

Benefits.       See     Insurance ; 

Workmen's    compensation. 
Bethlehem  Shipbuilding 

Corp.,     labor     agreement, 

353. 


Boards  of  directors,  repre- 
sentation on.  See  Em- 
ployees. 

Bolsheviks,  363. 

Bond,  Albert  S.,  70. 

Bonus,  6,  12,  69,  99,  143,  159, 
161,  215,  253,  290,  294;  at- 
tendance, 41 ;  cost  of  liv- 
ing, 89,  93;  economy,  73, 
75y  79  >  excuse,  41 ;  ex- 
pectancy, 140;  factors, 
152;  notice,  43;  produc- 
tion, 39,  90,  100;  quality, 
39;  retainer,  40;  service, 
42,   lOI. 

Bookbinders,   161. 

Boot  and  shoe  workers,  128, 

133- 

Brewery  workers,  259;  pro- 
hibition, 25 ;  Toledo,  252. 

Building  trades,  England, 
200. 

Business  agent.  See  Em- 
ployees ;   Shop  committees. 

Cafeterias,  10,  44,  48,  80. 

Calder,  John,  308. 

Canada,  printing  organiza- 
tion,  170. 

Carnegie  Steel  Works,  282. 

Citizens  League,  Indiana, 
136. 

Cleveland  Chamber  of  Com- 
merce,  387. 

Cleveland  Federation  of 
Labor,  2,  9. 


419 


420 


INDEX 


Closed  shop,  172,  182,  200, 
264.  Sec  also,  Open  shop; 
Preferential   shop. 

Clothing  workers,  194,  213, 
254,  329;  hours,  223.  See 
also  Garment  Workers ; 
Hart,  Schaffner  &  Marx; 
Ladies'  Garment  Work- 
ers ;  Rochester  Clothing 
Exchange. 

Collective  bargaining,  54, 
154,  I79>  192,  226,  236, 
247,  391;  ability,  278; 
clothing  workers,  225,  229; 
power,   177. 

Company  unions.  See  Unions. 

Complaints.  See  Griev- 
ances. 

Compton,  Willis,   225. 

Cooper  V.  Stronge  &  Warner 
Co.,  219. 

Cooperation,  71,  74,  80,  99, 
112,  164,  169,  247,  275; 
producers,  266;  production 
factor,  289. 

Coppage  V.   Kansas,  410. 

Cost  of  living,  75,  78,  83,  91, 
93,  155,  174,  179,  184,  192, 
225;  bonuses,  89. 

Costs,  17,  78,  145,  152,  292; 
accounting,  28 ;  finding, 
181 ;  keeping,  174,  179,  322, 
339;  opposition  to,  182. 

Credit  system,  268,  406. 

Demuth  Co.,  yy,  2gS- 
Dennison  Mfg.  Co.,  58,  285, 

294,  301,  303,  355,  385- 
Direct   action.     See   Strikes. 
Discharge.     See   Employees. 
Discipline.     See    Employees. 
Dodge   V,   Ford   Motor   Co., 

375,  393. 


Edison,   Charles,   388. 

Education,  11,  15,  22,  25, 
139,  271,  412;  Filene's,  48. 

Efficiency,  14,  17,  74,  79,  140, 
161,  286,  366,  398,  401 ; 
Filene's,  55. 

Employees,  10;  business 
ability,  125,  129,  258; 
classification,  97;  convicts, 
14;  discharge,  24,  31,  125, 
200,  206,  236,  255,  287; 
discipline,  30,  200,  206, 
211,  230,  243,  249,  267, 
378;  discrimination,  38, 
60;  Filene's,  51;  handi- 
capped, 13;  on  boards  of 
directors,  49,  52,  340,  380; 
reinstatement,  201,  207; 
responsibility,  360,  370; 
right  to  job,  51;  seniority, 
205;   skill,   20. 

Employees  Mutual  Benefit 
Association.  See  Milwau- 
kee Electric  Railway  & 
Light  Co. 

Employment         departments, 

24,  38,  49,  154- 
Equality  of  power,   396. 

Fair  day's  work.  See  Out- 
put. 

Filene's,  47,  54,  287,  338,  379, 
381,  389;  cooperative  as- 
sociation, 48,  341. 

Ford,   Henry,  274,   375,  416. 

Ford  Motor  Co.,  13,  294,  308, 

338,  413. 
Foremen,  11,  20,  26,  60,  74, 
79,  85,  97,  125,  129,  132, 
154,  194,  203,  217,  221, 
236,  25s,  283;  displaced, 
162;  esprit  de  corps,  33; 
importance,  305,  345,  359; 


INDEX 


421 


training,  28,  307.    See  also 

Superintendent. 
Foster,  Colonel,  138. 
Founders,  16. 

Garment  Workers,  395,  402. 
See  also  Clothing  workers ; 
Hart,  Schaffner  &  Marx; 
Ladies'  Garment  Workers; 
Rochester  Clothing  Ex- 
change. 

Gompers,    Samuel,    82,    384, 

403- 
Goodwill,  158,  171,  193,  291, 

320. 
Goodyear  Tire  &  Rubber  Co., 

347,  413. 
Grievances,  25,  33,  79,  97, 
127,  194,  203,  207,  241, 
244;  general  character,  94, 
102;  machinery,  88;  wage 
agreement,    106. 

Hall,  Bert,   148. 

Hart,  Schaffner  &  Marx, 
193,  294,  374,  381,  400, 
404;  labor  agreement,  241; 
statement  of  principles, 
231 ;  women,  202. 

Health,  216.  See  also  Sani- 
tation. 

Health  insurance.  See  In- 
surance. 

Hillman,  Sidney,  220,  249. 

Hiring  and  firing,  24,  30, 
125,  130,  132,  196,  200, 
23^,  255,  287. 

Hosiery  workers,  135. 

Hours,  19,  44,  74,  79,  81,  88, 
97,  ^33,  15s,  165,  175,  183, 
192,  230,  253,  264,  270, 
287;  clothing  industry,  223. 

Howard,     Earl     Dean,     196, 


200,     215;     statement     of 
principles,  231. 
Huebner   Brewing   Co.,   251. 

Impartial  chairman,  243, 
248. 

Industrial  democracy,  24,  33, 
56,  70,  89,  91,  93,  III,  126, 
199,  246;  dualism,  87; 
partnership,  62,  64;  policy, 
7,  12. 

Insurance,  66,  80,  147,  151, 
156;  health,  143,  270;  old 
age,  143,  153,  270;  unem- 
ployment, 220,  222,  294. 

International  Joint  Confer- 
ence Council.  See  Print- 
ing organizations. 

Joseph  &  Feiss,  36,  290,  294. 

Karl,  Louis,  128,  133. 

Knitters'  Union,   135. 

Labor  Adjustment  Board, 
Rochester,  235,  240,  243. 

Labor  management,  ideal, 
313;  problem,  316;  train- 
ing for,  304. 

Labor  managers,  2,  40,  165, 
242,  246,  249,  316,  318; 
qualifications,   238. 

Ladies'  Garment  Workers, 
91,  97;  Cleveland  report, 
412.  See  also  Clothing 
workers ;  Garment  work- 
ers; Hart,  Schaffner  & 
Marx;  Rochester  Clothing 
Exchange. 

Legal  aid,  148. 

Leiserson,  William  M.,  242, 
249. 


422 


INDEX 


Leitch,  John,  70,  ^7,  83,  87, 
91,  95,  III,  200,  343- 

Lemon,  Dr.  C.  H.,  151. 

Link-Belt  Co.,  26,  29,  307. 

Living  wage,  390. 

Lockouts,  83,  175.  184,  236. 
See  also  Strikes. 

Lockridge,  Ross  F.,  136. 

Machinists,  no. 
Management,  237,  275;  con- 
trol, 284;  earnings,  281; 
grievances,  103 ;  impor- 
tance, 269;  labor  policy, 
120;  limits,  291;  oppor- 
tunity, 263 ;  principles, 
273 ;  relation  to  capital  and 
labor,  277;  responsibility, 
283;  risks  of  capital  and 
labor,  280;  sharing,  373. 
See  also  Scientific  man- 
agement. 

Marx,   Karl,  268. 

Medical  service,  10,  99,  148, 
152;  examination,  97; 
families,  150;  group,  151. 

Metal  trades,  labor  agree- 
ment, 353- 

Miller,  Franklin  &  Basset, 
412. 

Millis,  H.  A.,  197. 

Milwaukee  Electric  Railway 
&  Light  Co.,  147,  295,  341, 

392. 
Motives.     See  Psychology. 
Mullenbach,  James,  193,  200. 

National       Association       of 

Credit  Men,  367. 
National        Federation        of 

Clothing       Manufacturers, 

248. 
National  Safety  Council,  271. 


New  York  Central  Fed- 
erated Union,  186. 

New  York  Paper  Handlers' 
Union,  178. 

New  York  Printers  Council, 

173- 
Newspaper  industry,  264. 

Nunn,  Bush  &  Weldon  Co., 
126,  287,  294,  342,  407;  co- 
operative  association,    127, 

134. 
Nurses,  visiting,  44. 

Old  age  pensions.  See  In- 
surance. 

"One  Big  Union,"  246. 

Open  shop,  145.  ^7^'  ^^7, 
195,  200,  236,  264,  265; 
union  position,  33.  See 
also  Closed  shop;  Prefer- 
ential shop. 

Output,  4,  6,  19,  30,  37,  72, 
75,  80,  98,  162,  166,  205, 
207,  210,  227,  236,  254,  269, 
291 ;  balanced  by  sales, 
270;  efficiency,  140,  161, 
365,  401 ;  factors,  280;  fair 
day's  work,  198,  209,  211, 
215;  increasing,  10;  man- 
agement, 277,  292,  375 ;  re- 
stricting, 266;  standardiz- 
ing, 213;  wages,  31. 

Packard  Piano  Co.,  70,  76, 
78. 

Part-time  work,  163. 

Penalties,  206,  244. 

Personal  relations,  203.  See 
also  Foremen,  Superin- 
tendents. 

Photo-engravers,     172,     180, 

I       389. 


INDEX 


423 


Physical  examinations,  96. 
See  also  Medical  service. 

Piece  rates,  208,  213,  219, 
225,  230,  391 ;  differential, 
223.    See  also  Wages. 

Piece  work,  6,  9,  43,  72,  75, 
82,  133,  161,  290,  292. 

Planning,   166;  scientific,  28. 

Plimpton  Press,  158,  160, 
284,  294. 

Power,  equality,  396. 

Preferential  shop,  202,  204. 
See  also  Closed  shop ;  Open 
shop. 

Printing  organizations,  ap- 
prentices, 188;  Canada, 
170;  danger  to  public,  172; 
joint  council,  166,  191 ; 
New  York,  173,  178; 
Pressmen's  union,  184, 
186;  Printing  Trades 
Assn.,  165;  standards,  174; 
strikes,  186;  Typothetas, 
165,   172,   181,   187. 

Printz-Biederman    Co.,    291, 

295. 

Proctor  &  Gamble  Co.,  362. 

Production.     See  Output. 

Profit  sharing,  7,  13,  16,  19, 
23,  (>Zj  152,  230;  capital- 
ization, 32;  failures,  135, 
267,   288. 

Profits,  61,  172,  226,  264. 

Psychology,  13,  16,  35,  46, 
99,  120,  144,  286;  motives, 
292. 

Railroad  brotherhoods,  408. 
Railroad  shopmen,  186. 
Recreation,   44;   Filenes,   48. 
Representation  on  boards  of 
directors.    See  Employees. 
Reserve  funds,  394. 


Rest  room,  44. 

Restriction  of  output.  See 
Output. 

Rochester  Clothing  Ex- 
change, 235,  381,  400; 
agreement,  240,  247;  con- 
tractors, 246. 

Rockefeller  plan,  91,  115. 

Rosenberg  Brothers,  245. 

Safety,  industrial,  199,  222. 
Safety  Council,  271. 
Sanitation,  18,  222,  238. 
Schlossberg,  Joseph,  246. 
Schwab,  Charles,  282. 
Scientific     management,     26, 

74,  158,  167,  321,  378,  391; 

personal  relations,  2y.   See 

also  Management. 
Secrist,  Horace,  177. 
Security,     investment,     268 ; 

job,  267. 
Seniority,  205. 
Service   department,    10,   22, 

38,  42,  137,  143;  legal  aid 

and  loans,  148. 
Shipbuilding        Corporation, 

labor  agreement,  353. 
Shoeworkers'     unions,     125, 

128,  133. 
Shop  chairman,  194,  206,  217, 

221. 
Shop  committee,  2,  8,  24,  68, 

71,  77y  133,  144,  155,  165, 
190,  266,  340;  appeals,  117; 
arbitration,  98,  175,  227, 
254;  betterment,  107;  busi- 
ness ability,  47;  failure, 
no;  hiring  and  firing,  125, 
130;  human  relations,  30; 
instituting,  343 ;  produc- 
tion, 164,  378;  share  in 
control,  107. 


424 


INDEX 


Shop  steward,   195. 

Sickness,  38,  255,  271 ;  ab- 
senteeism, 150;  accidents, 
150;  inefficiency,  150;  pre- 
vention,  149. 

Smoking  pipe  workers' 
unions,  82. 

Socialism,  ii,  155,  268. 

Sociology,   14,  21. 

Speeding  up,  30,  70,  216, 

Stabilization,  168,  208,  266; 
industry,  92;  wages,  264. 

Standard  of  living,  70,  98, 
177,  225,  228. 

Standardization,  168,  266; 
industry,  16,  192;  output, 
213;  work  and  wages,  208, 
216,  230,  264. 

Steel  industry,  18 ;  open  shop, 
264. 

Stock  sharing,  301.  See  also 
Profit  sharing. 

Strikes,  36,  82,  no,  145,  157, 
175,  183,  187,  191,  236; 
funds,  203;  service  record, 
102. 

Superintendent,  discharge, 
196;  qualities,  29;  relation 
to  workers,  33.  See  also 
Foremen. 

Swift  &  Co.,  308. 

Task  and  bonus  system.    See 

Bonuses. 
Taylor  system,  28,  158. 
Thieme,  Theodore  F.,  135. 
Time  and  motion  studies,  6, 

9,  26,  74,  79,  159,  209,  290, 

391.     See  also  Wages. 
Tufts,  James  W.,   197,  212, 

224. 
Turner   v.    Sawdon   &   Co., 

219. 


Turnover,  7,  9,  16,  20,  31,  35, 

154,  168,  177,  222,  271,  332. 
Typographical     union,      184, 

186. 
Typothetae,     165,     172,     181, 
187. 

Unemployment,  36,  83,    166, 

198,  237,  255,  257,  271; 
causes,  314;  eliminating, 
285;  fear  of,  269,  293;  in- 
surance, 220,  222,  294;  ir- 
regular, 220,  222;  over- 
time, 220;  seasonal,  92;  se- 
curity against,  270. 

Unions,  agitation,  116;  com- 
pany, 49,  54,  56,  115,  119, 
122,  345,  406;  control,  25, 
251;  discipline,  140,  402; 
fees,  202;  label,  133,  252; 
management,  226 ;  open 
shop,  33 ;  opposition  to  ma- 
chinery, 218;  organization, 
410;  organizers,  82;  out- 
put, 164;  preference,  166, 
253;  restrictions,  265;  se- 
curity of  job,  267;  value 
of,  402. 

Wages,  5,  10,  16,  20,  27,  30, 
38,  44,  51,  61,  75,  81,  91, 
96,  100,  109,  115,  130,  143, 

155.  165,    172,    184,    190, 

199,  211,  218,  222,  238, 
243,  254,  263,  274,  287,  292; 
commissions,  47;  contract, 
208;  Hart,  Schaffner  & 
Marx,  104;  increased  by 
sickness  prevention,   150. 

War   Labor   Board,   93,    96, 

107,  185,  353- 
Wayne   Knitting   Mills,    135, 

295,  38s,  394- 


INDEX 


425 


Welfare  work,  Filene's,  50; 

to  democracy,   147. 
White  Motor  Co.,  i,  200,  292, 

338,  385,  389,  392,  407- 
Whitley    Councils,    England, 

170,   173.   191- 
Williams,    J.    E.,     197,    200, 

209,    232;    decisions,    211, 

221. 
Wisconsin    State    Federation 

of  Labor,  380. 
Wolf,  Robert  B.,  308. 
Woll,  Matthew,  389. 


Women,  7,  10,  20,  2^,  38,  61, 
139,  162;  college,  40;  cost 
of  living,  155;  equality, 
138;  Filene's,  54;  Hart, 
Schaffner  &  Marx,  202; 
medical  service,  151; 
wages,   103,    109,   163. 

Working  conditions,  165,  175, 
177,   190,  230,  254. 

Workmen's  compensation, 
270;  Illinois,  223. 

Works  councils.  See  Shop 
committees. 


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